Taiwan: Auto stocks under pressure on sales forecast downgrade

Focus Taiwan News Channel (Taipei) - Auto shares came under pressure in Taipei Friday morning after local media reported that Hotai Motor Co., Taiwan's biggest car supplier, lowered its forecast for the size of Taiwan's car market in 2013, dealers said.

Concerns over falling private consumption that have mounted since the government cut its forecast for Taiwan's 2013 economic growth on May 24 put further downward pressure on auto stocks, they said.

As of 11:29 a.m., the auto sub-index had fallen 2.47 percent, with shares of Hotai Motor, the local agent of Japanese auto maker Toyota Motor Corp., down 4.63 percent at NT$309.00 (US$1.40).

Shares of Yulon Motor Co. had lost 0.88 percent to NT$49.90, while shares of China Motor Corp. had dropped 0.36 percent to NT$27.50.

The weighted index on the Taiwan Stock Exchange was up 0.08 percent at 8,102.23.

Citing unnamed sources, local media reported Friday that Hotai Motor has lowered its forecast for the size of Taiwan's new car market this year to 360,000 units from a previous estimate of 370,000 units. The car company would not confirm the reports.

A total of 354,585 cars were sold in Taiwan last year, with Hotai Motor accounting for about a 35 percent share, according to the government statistics.

"I think Hotai Motor downgraded sales expectations because the pace of the local economic recovery is slowing down, which has impacted local spending power," Hua Nan Securities analyst Henry Miao said.

On May 24, the Directorate General of Budget, Accounting and Statistics cut its forecast of Taiwan's gross domestic product growth to 2.4 percent, from a previous estimate of 3.59 percent.

The revision came after the local economy grew only 1.67 percent in the first quarter from a year earlier, much lower than the government's projection in February of 3.26 percent.

In the May 24 report, the DGBAS said it expected private consumption to rise 1.46 percent from a year earlier, a downward revision from an earlier estimate of 1.86 percent growth. The lower private consumption will pull down GDP growth by 0.22 percentage points, the statistics agency said. In 2012, private consumption in Taiwan grew 1.47 percent.

"Look at the weaker local private consumption. Hotai Motor's lower car sales forecast came as no surprise as consumers tend to put their plans for purchases of big-ticket items on hold," Miao said.

Miao said a recent plunge in the Japanese yen had also hurt local car sales because it has led many consumers to wait for further price markdowns by auto suppliers like Hotai Motor that have close ties with their Japanese counterparts before buying a car.

In the first five months of this year, car sales in Taiwan were down 3.8 percent from a year earlier. In May alone, local car sales rose 6.1 percent from April on new promotional campaigns, but still fell 1.9 percent year-on-year.

Miao said the auto sector is expected to face more volatility as foreign institutional investors cash in on the gains built in recent sessions.