Local car makers braced for a slow month with the start of Ghost Month on Monday.
Consumers traditionally hold off purchasing big-ticket items during the seventh month of the lunar year, known as Ghost Month.
"Our production facility started its one-week summer break on Monday," said Steven Yang (楊湘泉), spokesman of the nation's largest carmaker Hotai Motor Co (和泰汽車).
Production suspension is a common practice in the auto industry to control capacity during slow periods.
Hotai expects a 40 percent dip in sales during Ghost Month compared with the rest of the year.
Cumulative car sales in Taiwan from Jan. 1 to last Friday were 220,126 units, down 10.7 percent from the corresponding period last year, statistics from the Ministry of Transportation and Communications showed.
However, auto sales in the first 10 days of this month were unusually brisk, surging 569 percent from the same period last year to 15,938 units.
Yang attributed the sharp growth to incentives given to car dealers, including overseas trips, if they meet summer sales targets.
Hotai, which celebrated its 60th anniversary last Saturday, commands about a third of the domestic market.
Hotai president Daniel Chang (張重彥) said at the celebration that the company aimed to boost its market share to 40 percent by 2015, supported by the aggressive expansion of its lineup of sports utility vehicles and small trucks.
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Sales are likely to get a boost from the big discounts offered by a large number of vendors during the slow months and the launch of new models in the near term, she said.
Ford Lio Ho is the nation's fifth-largest automaker, with a share of about 7 percent.
Contrary to automakers' optimism, Taiwan Ratings Corp (中華信評) remained gloomy on market prospects.
"The market has not turned around yet from last year's slump," it said in a report last month.
Auto financiers have tightened their underwritings to cope with the slower-than-expected recovery in consumer credit, and this is likely to constrain car sales in the short to medium term, it said.