After car sales broke a 10-year record last year, the nation's auto industry is unlikely to achieve the same brisk results this year, market watchers said.
A saturated market and declining vehicle-replacement demand are likely to result in a 4.8 percent decline in the local auto market this year, slowing to 2 percent next year, according to a report released by Merrill Lynch yesterday.
The report predicts total car sales will drop to 490,411 units this year and 480,156 next year.
Last year, the nation's auto sales passed 500,000 units, smashing a 10-year-old record, stimulated by automakers' aggressive zero-percent financing programs and growth in demand for recreational and utility vehicles. Auto sales for last year stood at 514,626 units, up 6.3 percent from 484,286 units in 2004, according to statistics compiled by the Ministry of Transportation and Communications.
"Market demand this year will slide, as a portion of the new car market has been substituted by second-hand cars. The market is also constrained by limited roadway, population growth, as well as industrial migration to China," said Albert Hsu (
The slowdown in the auto market means that vendors who debut new models of superior quality will quickly increase their domestic market share, he said.
Among the listed makers, the US investment-research firm sketched a promising outlook for the leading manufacturer, Hotai Motor Co (
"Hotai Motor could gain market share in the next two years, as it will launch one new and one revamped model this year, followed by two revamped models next year," Hsu said.
China Motor will also be able to make slight gains in market share, as it is set to unveil two new models this year, and two more next year, he said.
The export market offers another new growth engine, Hsu added.
"As the design and manufacturing capabilities of some Taiwanese automakers are approved by their technology partners, the latter will leverage the strengths of local manufacturers to supply to other countries," Hsu said.
According to Merrill Lynch, China Motor will be the first to benefit, and possibly reap the most gains from the exporting trend.
China Motor, the most aggressive player in branching out into the export sector, intends to double the revenue contribution of its export business to 40 percent, aiming for revenue of NT$20 billion in three years' time.
Last month, the company exported 50 of its Grunder sedans to the Philippines, making it the first company to bring out locally assembled high-end cars overseas.
Meanwhile, the report said that if oil prices continue to climb, soaring fuel prices would drive up sales of smaller passenger cars with displacements of up to 1.5 liters. The market share of these cars increased from 6.6 percent in 2001 to 12.7 percent in 2004, although it dropped slightly to 11.6 percent last year.
Sales of hybrid vehicles, which save gasoline by switching between an electric motor and a conventional engine, will not live up to the hype over the near few years, according the report.
"Manufacturers already expect volumes of their hybrid vehicles to be low in the near term, as it is still too expensive for consumers to replace current vehicles with electric ones," it added.
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