According to the Taiwan Transportation Vehicle Manufacturers Association (TTVMA), domestic auto sales in February 2014 were up 15.7% year-on-year (y-o-y), to 15,154 units. However, this figure was distorted due to the Chinese New Year holiday effect. A more meaningful comparison would be to compare y-o-y growth in combined sales of the first two months of the year.
In fact, domestic auto sales for 2M14 came in at 48,219 units and were down 7.9% y-o-y. Indeed, the poor start to the year is in line with our bearish outlook on the market.
However, both the passenger car segment and the commercial vehicle (CV) segment had slightly divergent fortunes. The CV segment saw its 2M14 domestic sales mostly unchanged on a y-o-y basis, at 9,242 units. We have upgraded our 2014 CV sales forecast to pencil in a contraction of 0.4% versus -3.1% previously.
On the other hand, domestic passenger car sales declined 9.7% y-o-y in the first two months of 2014, to 38,977 units. However, we are maintaining our full-year sales forecast of a 1.8% decline, to 210,000 units, as we believe that the low base effects of 2013 will support growth in the coming months.
This will then revise our total 2014 vehicle sales growth forecast to -1.5%, to 255,000 units, from -2.0% previously.
We believe the sector will continue to face headwinds for the rest of the year. Our Country Risk team forecasts private consumption growth in 2014 to remain weak at 1.9%, which will result in lacklustre domestic passenger car sales. We also expect CV demand to remain weak as local manufacturers struggle from softening export orders, not least due to the ongoing slowdown in the Chinese economy.
Despite the poor start for auto sales, domestic vehicle production for the first two months of 2014 rose 2.9% y-o-y, to 52,935 units. This was due to buoyant vehicle exports, which grew 37.8% in 2M14, to 14,816 units. We believe exports will continue to remain a bright spot and support domestic output in 2014 ( see 'Car Exports...