Singapore Autos Report Q2 2008

After growth in Singapore's new vehicle sales fell by around 8% year-on-year (y-o-y) in 2006 to just 2.7%, the situation became worse in 2007, with a 10.4% contraction in the market. Although sales stablilised in the latter months of the year, to around the 10,000-unit mark, the damage had already been done when sales dropped by 20.78% month-on-month (m-o-m) and 16% m-o-m in February and July respectively. According to BMI's recently published Singapore Autos Report, the slide can be corrected, and BMI expects sales to recover to just over 147,000 units by the end of the forecast period in 2012 given our view of continued strength in the economy. The downside risk to this view would be inflation resulting from the economy's rapid growth in 2007.

A sustained and long-term return to the rapid consumption expansion seen in the boom years before the regional financial crisis still looks improbable, especially given competition from cheaper competitors such as China. As a result, even if our projections for a recovery in the market are met, we do not expect sales growth to climb above 2% for the remainder of the forecast period to 2012, particularly given the restrictions on registration numbers. However, an impending FTA with China should ensure greater bilateral investment and set the wheels in motion for a China-ASEAN FTA (CAFTA).

In BMI's newly revised Business Environment Rankings for the regional autos sector, Singapore rounds out the regional ranking in 14th place, despite high scores for its regulatory environment and low economic and political risk. Indeed, Singapore, along with Thailand, has the highest number of free trade agreements completed for an Asian market. The country is also the least corrupt in Asia, according to Transparency International. However, in industry terms, the lack of any domestic production facilities and the imposition of vehicle quotas, which restrict potential sales growth, drag on the market's overall rating.

In 2007, Toyota continued its dominance of the passenger car segment with a 21.01% market share, down from its full-year market share of 25.01% in 2006. Toyota also climbed back to the top of the commercial vehicle segment in 2007 with a 34.23% share, compared to its 16.45% market share in 2006 when it fell to third. Isuzu took second among commercial manufacturers with 18.7% and Mitsubishi (Goldbell) third with 14.5%. Of note are the gains made by China's Chery, which has risen to the top 20 passenger car manufacturers in 2007. Chery has climbed to 17th as its sales more then doubled in comparison with 2006.