Boston, MA -- (SBWIRE) -- 01/29/2014 -- Sales According to the Taiwan Transportation Vehicle Manufacturers Association (TTVMA), October 2013 auto sales declined 3.8% year-on-year (y-o-y), to 22,774 units. While commercial vehicle (CV) sales continued their dismal performance since the start of 2013 by declining 13.6% y-o-y in October (see 'CV Segment Woes Result In Downgrades', September 4), the passenger car segment has also clocked up poor sales during the past few months causing 10M13 sales in the segment to contract by 3.0%, to 178,993 units.
Although commercial vehicle (CV) sales are in line to meet our bearish full-year growth forecast of -13.9%, car sales have been doing worse than expected, and we are therefore downgrading our 2013 passenger car sales growth forecast to 1.0%, to 214,000 units, from 4.0% previously. This will then bring our total 2013 vehicle sales growth forecast to -2.2%, to 264,000 units, from 0.1% previously.
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We believe car sales are struggling to gain traction due to the weak Taiwanese economy. According to preliminary estimates by the country's statistical board, the country's GDP in Q313 expanded by a mere 1.6% y-o-y. We see consumer sentiment remaining weak for the rest of 2013 and our view is supported by our Country Risk team's downbeat 2013 private consumption growth forecast of 2.0%.
Turning More Bearish Going Into 2014
We are turning more bearish on the Taiwanese auto sector going into 2014. We do not expect the embattled consumer to begin loosening his purse strings especially as economic growth is expected to remain lacklustre. Furthermore, the structural rebalancing of the Chinese economy (Taiwan's largest trading partner) is starting to hurt some Taiwanese manufacturers, which we believe will pose a major headwind to CV sales as manufacturing orders begin to decline (see 'Strong Headwinds To Growth To Prevail In 2014', November 4).
In light of this, we are also downgrading our 2014 passenger car sales growth forecast to -1.8%, to 210,000 units, from 0.5% previously. However, given the steep contraction in CV sales in 2013 (we forecast a decline of 13.9%), we expect CV sales to remain roughly unchanged in 2014 at 51,000 units. This will then bring our total 2014 vehicle sales growth forecast to -1.2%, to 261,000 units.
As domestic sales make up about 80% of total output, local market dynamics have a major influence on automakers' production decisions. Therefore, in tandem with the decline in vehicle sales, auto production has also struggled in the past few months, bringing output for the first 10 months of 2013 to 275,142 units, a decline of 2.3% y-o-y. That said, it is in line to meet our bearish 2013 production growth forecast of -1.2%, to 335,000 units and we are happy to maintain it.
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