Wed, May 14, 2008 - Page 12 News List

Analysts bearish on car sales amid rising fuel prices

By Kevin Chen  /  STAFF REPORTER

Analysts remained bearish on the outlook for the local auto industry after the latest report on new car sales showed a more than 40 percent decline year-on-year in the first 10 days of this month, as consumers were worried about the new administration’s fuel policy.

Figures released by the Ministry of Transportation and Communications showed that new vehicle sales plunged 42.5 percent year-on-year to 3,427 units between May 1 and 10.

In the first four months of the year, domestic auto sales dropped 20 percent to 92,091 units year-on-year, the government’s data showed on May 2.

Nick Lai (賴以哲), an analyst at JPMorgan Securities (Taiwan) Ltd, said yesterday that he expected domestic auto sales to drop another 15 percent to 270,000 units this year, while some automakers forecast a 20 percent decline to 260,000 units.

Merrill Lynch (Taiwan) analyst Albert Hsu (徐志偉) last Thursday forecast a smaller 9 percent drop in auto sales this year to 310,000 units — a record low since 1988.

Against this backdrop, Lai recommended investors avoid auto stocks and revisit them in the fourth quarter of the year.

He said that the new administration was likely to raise domestic gasoline and diesel prices after it takes office on May 20, placing more pressure on auto demand in the near term.

Hsu agreed, saying higher fuel prices could hurt automakers’ sales and profitability because it could cap sales of larger and luxury vehicles and force consumers to switch to small and medium-sized models.

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