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Brazil car dealers slash sales outlook despite tax breaks

SAO PAULO, July 2 (Reuters) - Brazilian auto dealers slashed this year's sales forecasts on Wednesday despite extended tax breaks for the industry, which is struggling with tighter credit and plunging consumer confidence.

National dealership association Fenabrave cut its estimate for passenger vehicles to a 7.8 percent drop in 2014, down from an earlier forecast for a 3.5 percent decline. Fenabrave now sees heavy truck sales plunging 14.1 percent this year, compared with an earlier outlook for 1.6 percent growth.

The new forecasts came alongside registration data showing a 10.2 percent drop in Brazilian car, truck and bus sales in June from May and a 17.3 percent plunge from June 2013, as the start of the World Cup piled on to the industry's slump.

Fenabrave's dire outlook came just two days after the government decision to extend an expiring industrial tax incentive through the end of the year, prolonging a lifeline for the auto industry, which accounts for a fifth of Brazilian industrial output.

Brazil is the world's fourth-largest auto market and a major base of operations for the world's biggest automakers, including Italy's Fiat SpA, Germany's Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co.

(Reporting by Alberto Alerigi Jr.; Writing by Brad Haynes; editing by Matthew Lewis)