The Taiwan Transportation Vehicle Manufacturers Association (TTVMA) has reported that July domestic auto sales rose 9.5% year-on-year (y-o-y) extending their strong performance over the past five months, representing 10.3% y-o-y growth on a year-to-date (YTD) basis to 178,111 units. Continued strength in the sector was mainly due to the passenger car segment, which recorded y-o-y sales growth of 12.2% for 7M14 while commercial vehicle (CV) sales on the contrary, have declined 0.4% y-o-y over the same period.
The passenger car segment has seen consistent growth over 7M14, with the segment growing 15.2% y-o-y in July, taking the YTD growth to 12.2% y-o-y. The outlook for the segment remains positive, buoyed by more buyers looking to replace their old cars as the segment gradually moves toward its 10-year replacement peak. As such, we have raised our sales growth forecast up from 8.5% to 16.0% in 2014.
While the passenger car segment has seen robust sales growth, the CV segment recorded sales of 29,732 units for 7M14, representing growth of 1.8%. Although we have revised our forecast for commercial vehicles up to 1.7% from 0.7% previously, backed by strong growth seen in the heavy CV segment, we maintain our less favourable outlook on the commercial vehicle segment, with the passenger car segment expected to outperform.
Production should remain robust, with exports providing a slight lift. Auto production grew 7.7% y-o-y in July, bringing the 7M14 growth to 15.0% y-o-y. This increase has been supported by exports which saw a 23.1% y-o-y jump in July and growth of 27.2% y-o-y. With Volkswagen announcing in June that it will be setting up a fully-owned subsidiary in Taiwan and also considering building an auto assembly plant for auto exports, this reinforces our positive outlook on Taiwan's auto production growth and we maintain our bullish forecast of 15.3% for 2014.
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