Car sales seen declining 11.7% over uncertainties

Economy March 06, 2014 00:00


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NEW VEHICLE sales are expected to dip 11.7 per cent to 1.18 million units this year because of the political turmoil and post-election uncertainties, according to Frost & Sullivan.

Dushyant Sinha, associate director for Asia-Pacific automotive practice, said yesterday that weak economic growth, the after-effects of the government’s first-car-buyer programme and slowing demand would also shrink the automobile market. 
“There will be dwindling demand as buyers brought forward sales to take advantage of the incentives” under the tax-incentive scheme, he said. Foreign automakers, looking for fresh investment, are also likely to adopt a wait-and-see approach because of the political turmoil and uncertain new |automobile regulations and policies. 
Consumer sentiment is also likely to be weak. The consumer confidence index has plummeted for the last 10 months to its lowest in 26 months at 61.4, on a baseline of 100. 
“The political crisis is likely to further weaken consumer confidence,” he said. 
However, a growing middle class, which is expected to almost double to 36 million by 2020 from 19 million in 2012, and infrastructure spending by the government will continue to drive base demand for vehicles in the short to medium term. 
“The increasing income level of the middle class will also result in higher purchasing power,” he said.
The economy is expected to grow an average 5 per cent from this year to 2018, likely led by domestic demand, especially in infrastructure investment and private consumption. 
The infrastructure spending will help businesses move up the value chain and take advantage of growth in the Greater Mekong Subregion. 
“The large market of 67 million people, a growing middle class, pro-business environment, good infrastructure and geographical advantages including access to emerging markets such as Myanmar will help attract more investment,” he said. 
Vehicle sales last year declined more than 10 per cent to 1.33 million units because of the first-car scheme, which stimulated demand by more than 80 per cent in the previous year but advanced future purchases and depressed prices in the used-car market. 
Despite lower sales, Thailand remained the largest vehicle market in Asean thanks to the rollover effects of the first-car policy in the first half of last year. 
“However, Indonesia’s share in the overall Asean pie increased to 35 per cent, closing the gap with Thailand at 37 per cent,” he added.