Carmakers Lower Annual Sales Goals

Taipei, April 7, 2006 (CENS)--Yulon Motor Co., a local maker of Nissan and GM car models in Taiwan, recently lowered its forecasts for its sales volume this year, due to tightening consumer credit at local banks.

Hotai Motor Co. Ltd., which builds Toyota models in Taiwan and has been the No. 1 local auto seller for five years, also dropped its annual sales goal in February.

With several new models scheduled for introduction this year, Yulon originally held a very optimistic view toward sales volume for 2006, and predicted that the total domestic new-car sales would reach about 520, 000 units, with Yulon selling 75, 000 units.

After the adjustment, Yulon downgraded its total estimate for domestic new-auto sales to only about 470, 000, units its own sales to only 68, 000 new cars this year.

Automobile distributors have grown pessimistic about this year's new-car market, as most incentives and campaigns to increase new-car sales in the first few months of this year have won very minor responses from consumers.

In the first two months this year, a total of only about 80, 000 new cars were sold in Taiwan, down about 20% from the same period of last year. Yulon's new-car sales decreased by 30% during the period.

Wu Hsin-fa, president of Yulon-Nissan Motor Co., Yulon Motor's sales arm, attributed the sluggish domestic new-car demand to the government's tight consumer-credit policy, which has required banks to upgrade their risk-control mechanisms. About 15% to 20% of the consumer loans for buying new cars were rejected, Wu said, which prevented many car distributors from applying more loans.

Honda Taiwan Motor Co. manager Chen Jun-liang said that the tightening consumer-credit policy has also had a psychological impact on new-car buyers, especially younger buyers. According to Chen, the frequent newspaper reports about tightening credit policies have made consumers more cautious than before, and led to them considering new-car purchases much more carefully.

Officials of China Motor Corp. (Mitsubishi) pointed out that the average new-car buyer's decision-making period has grown to longer than three weeks, compared with about two weeks before.

Industry insiders explained that beginning in the second half of last year, many carmakers began providing incentives to boost their new-car sales, which has resulted in sluggish demand during the first quarter of this year.

According to the Wu, the sluggish new-car market might heat up again in the second quarter, as many carmakers plan to introduce new models during the period, including the new Honda Civic, Toyota Camry, GM Nubira, and Nissan Tiida.