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Brazil auto output and sales drop in March

(Adds details from Anfavea report, context)

SAO PAULO, April 4 (Reuters) - Automobile production and sales in Brazil sank in March as tighter credit, higher prices and weaker consumer confidence sparked caution at local showrooms and assembly lines.

Production fell 3.6 percent in March from February, according to data released on Friday by Brazilian automaker association Anfavea. Automobile sales dropped 7.1 percent in March after falling 17 percent in the previous month, Anfavea said.

While part of the decline stemmed from the fewer number of working days in the month due to the Carnival holiday, quarterly figures show a weak start to the year for Brazil's auto industry.

In the first quarter, accumulated production fell 8.4 percent from a year earlier to about 789,900 vehicles, while sales fell 2.1 percent to about 812,800 cars, trucks and buses.

President Dilma Rousseff and her predecessors have kept local car factories chugging along with tax breaks, cheap credit and import barriers, but industrial stimulus is now fading just as consumer confidence gives out.

While domestic sales retreat and exports plunge, Brazilian factories are adding capacity of more than 1 million vehicles in the next few years, battering the profitability of global carmakers' local factories.

Brazil is the world's fourth-largest auto market and has long been a source of cash for automakers such as Italy's Fiat SpA, Germany's Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co.

Fiat remained Brazil's top seller of cars and light trucks in March at about 53,770 vehicles. GM took second place, selling about 40,425, while Volkswagen sold 37,738. Ford followed with about 20,106.

Altogether, automakers in Brazil produced about 271,200 new cars, trucks and buses last month, while sales totaled around 240,800 vehicles, Anfavea said.

(Reporting by Brad Haynes; Writing by Asher Levine; Editing by Alden Bentley and Lisa Von Ahn)