BMI holds a cautiously optimistic stance on the outlook for Israeli new vehicle sales as we enter 2014. The past year has been fairly positive for new passenger car sales, which were up by 4% as of end-October 2013 (most recent data available as this report was being compiled), at 184,305 units, according to figures from the Israeli Vehicle Importers Association (IVIA).
This headline figure was made up of 150,364 passenger cars, 20,689 sport utility vehicles (SUVs), 10,019 vans and 3,233 pick-ups. Separately, truck sales (over 3.5 tonnes) totalled 7,292 units over the 10-month period, with bus sales standing at 1,857 units over the first nine months of the year. This makes for a total of 193,454 new vehicles sold over the first 10 months of 2013. On current trends, this would imply total new vehicle sales of 231,820 units in 2013, an increase of around 8% y-o-y. Across 2013, a stronger economic backdrop and somewhat calmer security situation both helped to push new vehicle sales higher, even despite the impact of changes to car sales taxes imposed by the government.
BMI believes that passenger car sales growth in 2014 will be slower than that for commercial vehicles, which could benefit from direct and indirect business activity associated with the start of natural gas production in the Tamar gas field. Turning to the wider macroeconomic backdrop, BMI's Country Risk team is targeting 3.2% GDP growth for Israel in 2014. We believe that the domestic economy will remain in a soft patch, with continued austerity measures hitting private consumption hard. As such, we expect economic expansion to remain sluggish over the coming quarters.
With regard to demand for private vehicles, we are expecting a slowdown in private consumption over 2014, to 3% growth, from 3.5% estimated for 2013. Other leading indicators continue to paint a relatively mixed picture of the domestic economy. The Bank Hapoalim's Purchasing Managers Index continues to decline steadily, having come...