Carmakers express pessimism for the market

Local car companies have expressed pessimism for the market, saying a decline in sales may continue into 2008.

They made the remarks after Minister of Economic Affairs Steve Chen Monday urged people to "replace big cars with smaller ones" in response to surging oil prices. His statement that "3,000cc vehicles are small" caused an uproar in the public, with people criticizing Chen for a lack of understanding of their pain and suffering amid an inflation.

Responding to Chen's remarks, auto companies said a replacement cycle is unlikely to be seen next year.

They said Taiwan's car market enjoyed a peak in 2005, when 514,000 new vehicles were sold, thanks to the huge popularity of sports utility vehicles.

Yet in 2006, sales began to decline due to increasing oil costs and accumulating card debts that severely impacted the Taiwanese economy.

And the downward trend has continued into 2007, as market analysts are slashing sales estimates from between 350,000 and 360,000 to between 320,000 and 330,000 after car companies such as Hotai, Yulon, and Ford lowered their sales targets.

China Motor Corp., distributor of Mitsubishi vehicles in Taiwan, is even more pessimistic as it expects total sales by automakers in Taiwan to fall below 320,000 this year.

Worse yet, China Motor said there is no sign showing the bearish market will end anytime soon. It said next year, sales of new cars in Taiwan would fall by another five to ten percent, translating into below 300,000, the lowest in 20 years.

According to China Motor, international oil prices may soon reach US$100 a barrel, and local gasoline prices may soon top NT$30 a liter, creating a psychological impact on drivers, who are reluctant to buy new cars in spite of the efforts of carmakers to hold prices.

Furthermore, China Motor said next year there will be a presidential election, an event that could cause further political and economic instability, forcing consumers to forgo plans to get new vehicles.

While China Motor expressed pessimism, Hotai, distributor of Toyota vehicles in Taiwan, expressed a different view, saying sales volume will pick up next year to 360,000.

The company said a major political breakthrough will come after the presidential election next year, adding the opening of direct cross-strait flights that will result from the election will boost the economy and stimulate the car market.