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(Adds details of forecast, context, new incentives)
SAO PAULO, Jan 6 (Reuters) - Auto sales in Brazil are expected to fall in 2016 for the fourth year in a row, national dealership association Fenabrave forecast on Wednesday, accumulating a 36 percent drop since 2012 as the country plunges deeper into recession.
Fenabrave projected a 5.9 percent drop in car and light truck sales and a 2.8 percent decline for bus and heavy truck sales this year, following plunges of 25.6 percent and 45.5 percent in 2015, respectively.
Brazil's auto industry has idled assembly lines and fired one in 10 workers over the past 12 months, but inventories still climbed to nearly 300,000 unsold vehicles, enough to cover 50 days of sales, according to Fenabrave.
The government, which cut back industrial stimulus in recent years as it struggled to shore up the federal budget, has little fiscal firepower but is working on novel forms of incentive for car buyers, said Fenabrave President Alarico Assumpção Junior.
He said the government may approve a program this month to encourage owners of cars older than 15 years and trucks older than 30 years to trade in their used vehicles for new ones.
Assumpção Junior said there would be no direct subsidies from the federal government and gave no details about financing for the government plan, which he said could help to sell 500,000 new cars per year, or a fifth of the current market.
The National Transportation Confederation has advocated in recent weeks for a national fleet renewal fund financed by a surcharge on all car owners similar to a universally mandated insurance fee.
President Dilma Rousseff is looking for ways to stimulate Brazil's ailing economy without relaxing her government's austerity drive.
Brazil's economy is expected to contract 3 percent in 2016 after shrinking nearly 4 percent last year, its worst two-year stretch in over a century, as a political crisis and corruption scandal batter consumer and business confidence.
Brazil entered last year as one of the world's five biggest auto markets and is still a major base of operations for Fiat Chrysler Automobiles NV, Volkswagen AG, General Motors Co and Ford Motor Co.
But tight credit, rising unemployment and a cloud of economic uncertainty has spooked car buyers. The crisis shuttered about 1,000 car dealers last year and another 600 could close this year, according to Fenabrave. (Reporting by Alberto Alerigi Jr.; Writing and additional reporting by Brad Haynes; Editing by James Dalgleish)