Automakers sacrifice profits for sales

Domestic sales of new vehicles finished strongly last year, moving nearly 400,000 vehicles following the introduction of numerous incentives by automakers and dealers.

Despite expectations that sales would follow the economy downward, auto executives said that they were able to counter the trend with loan incentives.

Consumers bought 398,877 new vehicles last year, up 14.8 percent year-on-year, according to statistics released by the Ministry of Transportation and Communications Friday.

"Sales last year were much better than expected," said York Chen (陳遠清), Ford Lio Ho Motor Co's (福特六和) vice president of marketing and sales. "Much of last year's sales, however, were fueled by profit-shrinking incentives."

Consumer confidence was low and the stock market declined under the influence of a sluggish economy last year, and leading automakers offered no-interest loans and huge discounts to encourage purchasing.

"But that push is not coming cheaply as the deals to lure buyers have been a severe burden on profits," Chen said.

Consumers have now grown so used to financing deals and other bargains that it will be difficult for automakers to back off, he said.

Driven by hefty incentives to meet year-end market-share goals, Hotai Motor Co (和泰汽車), the sales agent in Taiwan for Toyota Motor Corp, sold 100,531 motor vehicles last year, increasing 30.7 percent year-on-year to account for 25.2 percent of the market.

"We had a pretty good year in 2002 on all passenger models including Camry, Altis and Tercel," said Hotai spokesman Steven Yang (楊湘泉).

While Yang crediting "a stable economy" for the company's strong performance, he acknowledged that the company worked to boost its sales volume for a market share increase.

"In December, we spent up to NT$400 million in marketing," he said.

By providing no-interest loans and huge discounts to encourage purchasing, Hotai's December sales rose 165.6 percent to 14,717 units, much higher than some analysts' predictions. But Yang declined to elaborate on the hit to profit margins that the company has endured.

The runner-up in domestic sales last year goes to China Motor Co (中華汽車), the local Mitsubishi Motors Corp assembler and distributor.

According to government statistics, China Motor sold 99,334 vehicles, an increase of 26.1 percent from a year ago and accounting for 24.9 percent of the market. The company also invested heavily in marketing to drum up sales, which rose 156.1 percent in December from a year ago.

Yulon Motor Co (裕隆汽車), Taiwan's third-largest automaker, which assembles Nissan vehicles, sold 56,374 units last year with a market share of 14.1 percent. Ford Lio Ho, the nation's fourth-largest automaker, sold 46,775 units with a share of 11.5 percent.

Vehicle sales for this year are expected to, at best, be the same as last year's figures since the economy is predicted to remain sluggish, Chen said, stressing that recreational vehicles (RV) may play a bigger role in auto sales this year.

"As growth in other segments of the market reaches saturation, RV sales may soon expand," said Jesse Chen (陳培光), a manager at Ford Lio Ho.

The company is banking on new RV models to help it increase market share. The company sold around 15,000 Escape sport-utility vehicles last year. It's introducing a new 3-liter four-wheel-drive Escape this month.