Boston, MA -- (SBWIRE) -- 08/13/2013 -- Executive Summary

April auto sales figures from the Taiwan Transportation Vehicle Manufacturers Association (TTVMA) came at 17,382 units, down 3.3% year-on-year (y-o-y). Vehicle sales for the first four months of 2013 were 89,533 units, down 10% y-o-y. The poor start to 2013 has caused us to downgrade our sales growth forecast for this year to 2.7%, to 277,000 units, from 7.3% previously.

Passenger car sales have not fared too badly, with both January and April registering positive y-o-y growth. However, the weak start to 2013 has caused us downgrade our sales growth forecast to 4.0% from 7.0% previously, to 220,000 units.

On the other hand, commercial vehicle (CV) sales suffered a sharp fall in the first four months of 2013 to 16,984 units, a decline of 25% y-o-y. Due to the low base, growth rates in this segment experience sharp swings in either direction. We are downgrading our CV sales growth forecast to -1.9%, from 8.2% previously, to 57,000 units. This would then bring our 2013 total auto sales forecast to 277,000 units.

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A new lithium battery plant is set to be built in Taiwan. Japanese firms Sanyo and Sony are set to invest in the new plant after talks with the Taiwanese government. The government is currently helping the Japanese firms find a local partner for the plant. Electric vehicle (EV) batteries will be a major focus of the plant, meaning that local firm Yulon Motor is a front-runner along with Simplo Technology for the deal. Taiwan's government has made a strategic decision to foster the development of a local electric vehicle market, explaining their involvement in this planned manufacturing centre.

We are starting to witness an increasing amount of domestic investment from Taiwanese businesses that had previously set their sights outside Taiwan. The Investment Commission has noted that Taiwan businesses have, in recent years, been reorienting their investments away from China and towards ASEAN members, with investment in the mainland reaching a three-year low in 2012. The Taiwanese economy looks set to be a key beneficiary of such a phenomenon. According to government statistics, officials approved US$5.7bn worth of homebound investment by Taiwanese businesses between November 2012 and February 2013, with a majority coming in this year. This eclipses the US$5.0bn and US$5.6bn in total foreign investments that Taiwan garnered in 2011 and 2012 respectively.

Comparatively to China, in addition to a narrowing differential production cost, Taiwan affords businesses a greater degree of intellectual property protection, a strong rule of law, as well as a more stable political environment. Recently two automakers, Volkswagen (VW) and PACCAR have announced investments in Taiwan.

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