Brazil car dealerships cut sales forecast as tax stimulus wanes

* Dealership group halves 2012 sales outlook to 4 pct growth

* October sales figures show weaker boost from tax cuts

SAO PAULO, Nov 6 (Reuters) - Brazilian car dealerships cut their 2012 sales forecast in half on Tuesday as short-term tax incentives boosted demand less than was expected in the world's fourth-largest auto market.

Sales of cars and light trucks are anticipated growing between 4 percent and 4.8 percent this year from 2011, industry group Fenabrave told reporters, down sharply from an 8 percent growth estimate issued just two months ago.

The new outlook reflects more moderate expectations for an emergency tax cut President Dilma Rousseff unveiled in May to help the stalled auto industry spur a broader economic recovery.

The effects of that stimulus appear to have peaked in August, when customers expecting the tax cuts to expire flooded showrooms and boosted sales that month to an all-time high.

Rousseff has since extended the incentives for locally produced vehicles - which reduce the price to consumers by about 7 percent - through the end of the year.

After the August sales bonanza, Fenabrave raised its yearly sales forecast from a slight contraction to an 8 percent growth target, but the stimulus has offered diminishing returns.

Car, truck and bus sales in October totaled about 341,700 vehicles, Fenabrave said on Tuesday, averaging around 15,500 sales per day - stable from September but down sharply from a peak above 18,000 sales per day in August.

Brazil is a key market for the world's biggest automakers, including Italy's Fiat SpA, Germany's Volkswagen AG , as well as U.S.-based General Motors Co and Ford Motor Co.

Fiat held the top spot in Brazil's auto market in October, selling 80,797 vehicles, a 20 percent increase from September. Volkswagen was second with sales of 70,562 cars and trucks, a 13 percent increase over the previous month.

GM sold 54,065 vehicles in October, up 13 percent from September, while Ford sales rose 28 percent to 29,936 cars and trucks.