Vehicle sales in Taiwan in July 2013 stood at 26,841 units, up 4.8% year-on-year (y-o-y), according to the Taiwan Transportation Vehicle Manufacturers Association (TTVMA).
Owing to the low base effects of H212, passenger car sales in July grew 6.5% y-o-y, to 22,110 units, which is in line with our view that passenger car sales will see a bounce in H213. This provided a lift to overall sales. While 7M13 car sales remained roughly unchanged on a y-o-y basis at 132,273 units, we believe favourable base effects will continue to aid sales in the coming months. We are maintaining our full-year growth forecast of a 4.0% y-o-y rise in passenger car sales, to 220,000 units.
In contrast, commercial vehicle (CV) sales continue to disappoint with 7M13 sales tumbling 23.1%, to 29,215 units. Our Country Risk team remains downbeat on the Taiwanese economy and envisages further declines in manufacturing activity over the coming months, which we believe will be a major factor contributing to sustained weakness in CV sales ( see 'PMI Showing Corro borates Downbeat Growth Outlook ', September 4).
The trend in auto production mirrors that of vehicle sales. This comes as no surprise to us given that exports only make up about 20% of total industry output, which results in domestic sales trends having a major influence on automakers' production decisions.
Auto production in July 2013 rose 9.8% y-o-y, to 34,781 units.
Similar to passenger car sales, car production remains a bright spot in the sluggish economy, with 7M13 production increasing 4.9% y-o-y, to 170,793 units. The strong performance thus far has prompted us to upgrade our passenger car production forecast to 4.0%, to 289,000 units, from 1.8% previously.
On the other hand, CV production has disappointed as demand from businesses remains lacklustre, with 7M13 production declining 28.8% y-o-y, to 26,862 units. The poor performance has caused us to downgrade our 2013 CV output growth forecast to -25.0%, to 46,000 units.