Taipei Times (TT): The local auto market is declining. What are the main factors and how do you view the market in general?
Wolfram Geisler: The market has been in a downturn since 2005, when it reached its peak. This has to do here with the political situation, cross-strait tensions, election campaigns and then it comes to customer sentiment. Another reason why it went down was also driven by the fact that between 1 million and 1.2 million people left Taiwan and work in China. In fact, just 10 days ago, J.D. Power and Associates in China mentioned to me that: “Your Chinese colleagues should say thank you to you, because you are sending a lot of customers.”
There was a second point on the consumption side; the domestic airlines almost died because the launch of the Taiwan High Speed Rail took out the demand for long distance drives. Mileage for our customers went down from 14,000km to 9,000km a year, which represents a 50 percent extension of the life cycle of the car.
PHOTO: CHANG CHIA-MING, TAIPEI TIMES
TT: Do you think the situation will improve? When will the auto market regain its momentum?
Geisler: The situation could only improve if the customer sentiment is changing. Another factor here is the age of the car fleet, 47 percent of Taiwan’s cars are older than 10 years, and this is [something that should help industry]. Actually, it was expected to come because of the fuel price and CO² [carbon dioxide] issue. These two things together certainly make it more appealing to buy modern cars, which have less pollution and fuel consumption.
In terms of emission standards for cars, Taiwan is now currently in phase four [Euro 4], but 45 percent of the cars in Taiwan are still in phase two or three, so they have high pollution and fuel consumption. In other countries, usually you pay a higher tax for polluting vehicles, but that is not the case here. This would also be a source of income for the government if they could try to implement it.
However, they always think you must subsidize, and that is wrong. You must drive it in a proper way, and there can also be a kind of penalty.
In Singapore, for example, 67 percent of the vehicles are less than five years, and 87 percent are seven years or younger, because you cannot drive a vehicle usually over 10 years. And the Certificate of Entitlement is only valid for 10 years. And that’s why the population of Singapore cars is younger, and they have very modern, safe and environmentally friendly vehicles.
TT: What is Mercedes-Benz’s sales outlook this year and for next year?
Geisler: Our sales are currently down 18 percent [from the same period a year earlier] and I think we are down at least 20 percent this year. As for the overall market in Taiwan, sales of passenger vehicles may not even reach 160,000 units anymore. We keep in the lead in our segment, but it’s unbelievable when I see with what numbers we keep the lead.
TT: What were the company’s original expectations?
Geisler: We expected about 5,000 units this year, or a bit more. Actually, the original target was 5,500, but this includes Smart [an automotive brand of Daimler AG], which is on track. Last year we sold 5,160 units.
TT: Recently oil prices have been dropping very sharply. Do you think this will help auto sales?
Geisler: No, not significantly. First of all, oil prices in Taiwan are not so high. Second, consumers who buy Mercedes-Benz are less price-sensitive to oil prices. They are mainly impacted by the stock exchange. And we should not forget, people who have money in the stock exchange have lost 60 [percent] to 70 percent. Now the luxury segment is also hit because customers in this segment are the ones who have invested more money in the stock exchange.
TT: Will oil prices continue to go down, or might they go up again?
Geisler: You see what happened. OPEC cut production and prices fall still.
There are two views from my perspective. I cannot tell you what oil price is really doing. But I think for environmental and other reasons, we should not go back to the old behavior. Even if oil gets cheap, we should look to consume less oil, regardless the price. But on the other hand, everybody knows oil is limited, so I don’t think oil price will go down in the long run. It may stabilize.
TT: Will the role of speculation in the financial market have something to do with the high oil prices? What’s the risk in it?
Geisler: I think [speculation had a big impact when the] oil price went up to US$147 a barrel [in July]. The question is an overbalance between demand, availability and pricing. If we have this money going all the time into this, in my view, we will have a risk.
This money was seeking to make money. People are not happy with the 2 [percent] to 3 percent [interest level] which they got at the banks. This is why almost all banks move us into the financial crisis by creating instruments which are not really backed by the real value. The housing crisis in the US is the first sign of oil. Because it happened at the time that this price of oil futures was not the price at the pump, but it reacted as if it would be at the pump. So we created another bubble.
The ability to invent financial instruments is logically faster than legislators’ ability to control. Because they can only control what they know, and they know it only when it’s in the market. And this is what happened now; all of a sudden, Lehman Brothers brought us downhill because they created a bubble.
TT: When do you expect the global financial crisis to come to an end?
Geisler: I don’t think it will be fast. We need to see what the outcome of the G20 [meeting yesterday in Brazil]. We have not seen any regulatory changes for the current financial crisis, but see now the move of the financial crisis into the economic crisis. The only hope is that people who still have money may use the time of the low stock exchange and invest, so the stock exchange could rise, but this may take a couple of months.
It depends very much on the world’s reaction, especially in those markets where [the momentum of] growth still exists, for instance, China. We need to see how this growth potential can be raised. And if enough growth is generated on a worldwide basis, in those economies which have purchasing power to buy valuable goods, not only the basic goods, then we’ll see a turnaround, but this takes some time.
TT: Do you think people still have the money to buy new cars?
Geisler: Basically yes, as for the past, there is no reason. But the unemployment rate in Taiwan is rising, so some people will lose their money or not have enough money to buy new cars.
It’s a question of how the industry is really reacting. The first sign that I saw was quite positive. For example, some companies opted to cut executive pay by 10 percent, so they try to save and avoid layoffs. If this is the case, then it’s much better and softer. But this will not encourage people to buy new vehicles. That’s why I don’t expect to see a big move in the next six months.
The luxury car market will likely see a recovery when the stock market goes up, whereas the average market is driven more by job security.
TT: What steps will Mercedes-Benz take to help stimulate sales?
Geisler: First of all, we must also see and face the reality that you cannot buy a market [when it’s not there]. You can stimulate to a certain degree, and that is what we are trying to do with various programs. Basically, just make it attractive to buy a car to a certain extent.
TT: What are the changes you have noticed in consumer trends for car-buying?
Geisler: In Taiwan, people are not big fans of sport-utility vehicles anymore, because of oil prices. I believe we will also see a trend towards diesel [vehicles] and also a trend away from SUV to station wagons, and into more fuel-saving vehicles.
There is a kind of downsizing in the market. Not necessarily compact cars, but more in engine size, which has to do with fuel consumption. But [engine downsizing] is not very strong here; in Europe it’s much stronger. If I look at our agents’ sales, currently we sell C-Class [a compact luxury sedan] the best, which is different from the past when we sold more big cars.
TT: What cars do you expect to become more popular next year or in the future? What are the models that Mercedes-Benz will focus on next year?
Geisler: I think there will be more mild hybrid cars in the future, such as our Smart mild hybrid is about to come out in December. We will have one new model launch in late December, a light SUV GLK, based on the platform of the C-Class. It’s kind of a crossover; it looks bold and fits to the taste, particularly here in Taiwan.
But it does not have the disadvantage of a heavy SUV and its fuel consumption.
The C-Class Estate has always been more popular than SUVs in Europe. The Taiwanese replace Estate with the SUVs, but are paying the price of higher consumption. I think it has to do with the driving behavior of getting safer in the car. That’s why I believe the GLK will find its market.
TT: Mercedes-Benz is known for its support of music events and local community activities. What is the main idea behind it?
Geisler: The original idea started in 1997 and it was mainly to offer the customers and Taiwanese society in general, because you cannot select to just offer high-end concerts. And we were definitely driven by the thought that our customers are closer to classical music.
We found out this is rewarding as we get a lot of presence in the press and on the streets. We also found out that this is good for Taiwan, because in many other countries, very often these cultural events are hosted by embassies. And it’s also rewarding because our customers liked it.
And our story is now what everybody calls it corporate social responsibility, which we started when it didn’t exist. That’s why we further developed it, and we are active meanwhile in three areas, classical music series, jazz and charity activities. Aside from classical music concerts, since early 2006, we started in another area with the Phantom of the Opera, the idea that we thought would give the brand a younger image.
And we moved further into jazz to make it more appealing to young people in the community. This year was our second year with the summer jazz. Actually, we did this before, but under Chrysler and not Mercedes-Benz.
And our third area is the direct charity activities, which are linked with our golf tournament as a part of the Mercedes-Benz world tournament. In Taiwan, we donate the money to children’s charities.
With an approval rating of just two percent, Peruvian President Dina Boluarte might be the world’s most unpopular leader, according to pollsters. Protests greeted her rise to power 29 months ago, and have marked her entire term — joined by assorted scandals, investigations, controversies and a surge in gang violence. The 63-year-old is the target of a dozen probes, including for her alleged failure to declare gifts of luxury jewels and watches, a scandal inevitably dubbed “Rolexgate.” She is also under the microscope for a two-week undeclared absence for nose surgery — which she insists was medical, not cosmetic — and is
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
GROWING CONCERN: Some senior Trump administration officials opposed the UAE expansion over fears that another TSMC project could jeopardize its US investment Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is evaluating building an advanced production facility in the United Arab Emirates (UAE) and has discussed the possibility with officials in US President Donald Trump’s administration, people familiar with the matter said, in a potentially major bet on the Middle East that would only come to fruition with Washington’s approval. The company has had multiple meetings in the past few months with US Special Envoy to the Middle East Steve Witkoff and officials from MGX, an influential investment vehicle overseen by the UAE president’s brother, the people said. The conversations are a continuation of talks that
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
RSS