The domestic auto market is unlikely to see significant or rapid growth over the introduction of cheaper Chinese models, Taiwan Ratings Corp (中華信評) analysts said in a report yesterday.
“The poor image and safety issues associated with Chinese cars may concern potential buyers in Taiwan, although good quality inspection procedures in the domestic assembly process and after sales support could partly offset this,” credit analyst Frank Fan (范維康) said in his report, Chinese Branded Cars Are Unlikely To Jumpstart Taiwan’s Sluggish Auto Market.
Chinese-branded cars are likely to gain a foothold in Taiwan in terms of sales, but are unlikely to meaningfully improve the market’s total value or change its competitive dynamics, Fan wrote.
The ratings agency estimated that Chinese cars would only attract the interest of price-sensitive buyers and most likely take a share of the used-car market if retailers can successfully manage price, distribution and maintenance issues — the very selling point of the Nano car, the brainchild of India-based Tata Motor Ltd.
Taiwan Ratings, the local arm of Standard & Poor’s, expects these models to either carry existing brand names or be renamed, and are likely to cost between NT$300,000 (US$91,000) and NT$400,000, about 30 percent less than similar sized cars from major US and Japanese brands, Fan wrote.
Fan said the domestic environment was likely to become more challenging for local automakers in the next year or two as purchasing power continues to deteriorate until the economy shows signs of real improvement.
This had led to rising price competition, which puts more pressure on local automakers’ profitability and credit profiles, particularly weaker players, which have been likely operating at or near an uneconomic scale since last year and face consolidation threats, Fan wrote.
Therefore, plans to manufacture and sell Chinese-designed and branded cars will face a major obstacle in bridging the gap between demand and affordability, given that volatile fuel costs over the past 12 months and declining personal income levels have become leading factors affecting buyers’ decision-making, the report said.
“Even if the newly introduced cars do gain acceptance from discerning car buyers, they are unlikely to affect market dynamics substantially,” Fan said.
Several auto companies have announced plans to market cheaper Chinese branded cars, the report said, including Fortune Motors Co (匯豐汽車), a member of the Yulon Motor group (裕隆汽車), which plans to introduce Geely Automotive Ltd’s (吉利汽車) models through its local sales network — a franchise of more than 200 used-car dealers.
Fortune’s plan includes utilizing Yulon Motor’s car assembly facilities, a move that would qualify the Geely model as a locally made car for tax purposes.
Prince Motors Co (太子汽車) plans to introduce models from Chery Automobile Ltd (奇瑞汽車), which already has a strong export order book.
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