Boston, MA -- (SBWIRE) -- 01/24/2013 -- New passenger car sales in Lithuania rose 64.6% year-on-year (y-o-y) in 2011, to 12,294 units, according to the state registration agency Regitra. New commercial vehicle sales also grew by 95.8% y-o-y, to 4,690 units, according to figures released by the European Automobile Manufacturers Association (ACEA).

This gave a total new vehicle sales figure of 16,984 units for the year, an increase of 72.2% y-o-y. However, it has been a different story in 2012 year-to-date, with new passenger car sales down by 2.5% over the first nine months of the year, at 8,900 units. Commercial vehicles sales have also fallen back, down by 5.2%, to 2,972 units over the January-August period.

Against this deteriorating backdrop, BMI has revised down its 2012 new passenger car sales forecast to a fall of 5% for the full year. With commercial vehicle sales also set to decline by some 7%, this equates to a 5.5% annual decline across the new vehicle sales market as a whole. The forecast is based on increased evidence of a renewed slowdown in the Lithuanian economy, with BMI's Macroeconomic team forecasting growth of just 1.4% in 2013, down from 2.3% growth in 2012. Domestic demand is also being suppressed by both falling private consumption growth and still-high unemployment (13.3% in Q212). Inflation is also still potentially a concern for the domestic economy, with the HICP measure of inflation standing at 3.4% in September 2012, although this is down from earlier in the year. This raises the spectre of the Bank of Lithuania potentially having to increase interest rates from current low levels of just 1.5%. Higher interest rates would also feed into higher loan rates on car financing agreements, which could further depress demand over the short term.

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Beyond 2013, BMI is more optimistic on the longer term outlook for the Lithuanian new vehicle sales market, forecasting expansion of 36.9% in total vehicle sales between end-2013 and end-2017, to reach 23,695 units. This is based on our view that a more pronounced recovery in demand from developed markets and improved fiscal dynamics should pave the way for a stronger growth trajectory and, by extension, higher new car sales for the country. Commercial vehicle sales will grow at a faster rate than that for passenger cars over the forecast period. The main threat to our new car sales forecasts remains a break-up of the eurozone, with the risk remaining that Greece may have to default in 2013.

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