Short-term slowdown in new vehicle sales
Having shown some signs of strength earlier in the year, the market for new vehicles in Taiwan is expected to slow in the coming months, as political turmoil increases and the global economic environment becomes increasingly uncertain. Relations with China continue to cast a shadow over sentiment and the new government is demonstrating increasing signs of weakness. GDP growth is forecast to slow sharply next year, to around 4.5% from an expected 5.5% in 2000 and 5.7% in 1999, with a slowdown in export growth also undermining domestic sentiment.
Outlook for growth good after short-term weakness
Underlying vehicle replacement demand is increasing in Taiwan, as the vehicle fleet/parc continues to age. This will limit the downside potential for both the passenger car and commercial vehicle markets in a slowing economic environment. We expect the weakness in the market will be short-lived, provided that nothing dramatic occurs on the political front, including the Island’s relations with mainland China, and provided that the global economic growth does not deteriorate substantially. We are expecting US GDP growth to weaken significantly in the short-term, but at this stage we do not anticipate a US recession. With Taiwanese vehicle demand having been on a declining trend since peaking at 577,000 units in 1994, we expect that once the current uncertainty is worked through we will see a period of moderate but sustainable growth. We do not expect volumes to reach previous peak levels in the foreseeable future, however.
Summary* forecasts: vehicle sales in Taiwan by type, 1997-05
Sources: TTVMA; industry sources. Forecasts: www.MotorBusiness-Asia.com
Yulon dominates passenger car market
Yulon Motor is the leader in the passenger car sector with 28% of domestic sales (not counting imports). It has two of the top three selling models, the Nissan Sentra and Cefiro, although Toyota‘s new Premio models is leading the market this year. China Motor dominates the light commercial vehicle segment, but has only one passenger car model in the top ten. Ford has recovered some of the ground it lost over the last few years, but we do not expect it regain the market leadership it had in the mid-1990s.
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8-year transition period following WTO membership
We expect that WTO membership will have mixed effects on Taiwan’s vehicle market in the short-term, with an eight-year transitional period allowing the domestic industry to face up to increased competition. Quotas are expected to restrict import sales to a maximum of 20% at the beginning, rising to 40% towards then end of the transition period before they are removed altogether. Import duties will also come down gradually. Nevertheless, greater liberalisation is likely to drive further restructuring in the automotive industry. We have already seen some of the smaller vehicle assemblers bowing out.
Role sought in regionalisation of Asia’s auto sector
The larger vehicle manufacturers, such as Yulon Motor, China Motor and Kuozui Motor, and their suppliers, have made significant progress in facing up to the challenges ahead. They have developed valuable R&D skills and are supporting their global partners’ expansion in Asia, particularly in China but also in India and in the Philippines. Their aim is to secure a central role in the regionalisation of Asia’s automotive industry, and so far they seem to be succeeding. Renault-Nissan is expected to make a statement this month on how it intends to integrate Yulon in expansion strategy for the region.
Renault-Nissan intends to integrate Yulon in expansion strategy for the region
We expect mainland China will play an increasingly important role in the future of Taiwan’s automotive industry, with more and more components traded and greater economies of scale generated between the two markets. Already, around 50 Taiwanese parts suppliers have set up operations on the mainland (Fujian province) to supply China Motor’s Delica and Freeca production lines. Lower land prices and wage costs on the mainland will mean that exports from the mainland to Taiwan will see strongest growth. The minimum local content requirement in Taiwan has been dropped to 40% this year, and will be eliminated altogether under WTO.
The full report contains a detailed assessment of the political and economic outlook in Taiwan. It analyses the current trade/regulatory environment and how this will change under WTO. Detailed market analysis and forecasts – by vehicle type to 2005 and CKD sales by model and segment to 2003 for cars and commercial vehicles. Assessment of the vehicle industry’s competitive structure and how it is adapting to the changing market environment. Historic data: 1997-Jan-Oct/2000
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