OUTLOOK: Hong Kong 2001 car sales seen lower; recovery only in 2003/4

HONG KONG (AFX-ASIA) - Motor car sales are expected to fall this year and may only really recover in 2003/4 due to the considerable uncertainties surrounding Hong Kong's economic outlook, with recent interest rate cuts failing to provide any real stimulus to interest, industry officials said.

	    Interest rate reductions made following the U.S. Federal Reserve's lead have failed so far to give anything more than a temporary boost to the stock and property markets, with consumers concerned about their immediate employment prospects and the overall outlook for Hong Kong.

	    The same is true for motor car sales.

	    Figures from the Motor Traders Association show first quarter car sales fell 16.6 pct from a year earlier to 6,173.

	    Crown Motors Ltd sales division director, Godfrey Tsang, said sales of private vehicles will continue to decline.

	    "We expect a 9.0 pct decline in the sale of private cars in Hong Kong in 2001, compared with 2000, with a slowdown in the economy, while the figures will only see a (full) recovery in 2003-2004," Tsang said.

	    He said he expects total sales of 24,500 this year, against 27,000 in 2000, with the market perhaps picking up to 26,000 next year.

	    Tsang said there are a number of factors behind the weaker sales outlook for this year.

	    "First, there was speculation last year ahead of the (March) budget that the government would raise the licence fees for private cars. This triggered a relatively higher base comparison for the first three months last year," he said.

	    "An earlier Lunar New Year holiday also attributed to a weaker sales during the first quarter this year," he said, adding that new models also only came into the market after the Lunar New Year in January.

	    He said sales should see some improvement during the second half of this year, especially as the interest rate cuts begin to make themselves felt.

	    "The cost of borrowing is lower for mortgage payers, raising their net disposable income by around 4,000 hkd per month on average when compared with before the rate cut cycle. 

	    "However, it is difficult to say whether people are willing to consume as the outlook over the economy in Hong Kong remains uncertain," he said.

	    Tsang said prices should remain stable for the year, with general models pegged at around 140,000-150,000 hkd and luxury models at around 500,000 hkd to above 1.0 mln hkd. 

	    "Price rises are unlikely this year," he said.

	    "Sales of motors will definitely be affected with a downturn in the economy, coupled with a period of uncertainty," Jeff Heselwood of the Motor Traders Association said.

	    He said sales in lower-end vehicles were usually hit first rather than luxury cars, adding that it is difficult to say when sales will improve.

	    "It is difficult to tell. We hope that sales could improve toward the end of the year," Heselwood said.

	    BMW Concessionaries (HK) Ltd's marketing director, Newman Tsang, said first quarter BMW sales fell 4.0 pct year-on-year to 384.

	    "The first quarter figures underscored the difficulties in the motor sector, with a weak property market and stockmarket during the period. The situation is improving, though, as we have already got 600 orders on hand," he said.

	    "In our recent car launch held at Ocean Terminal in March, we successfully sold 200 cars, which were priced 150,000-210,000 hkd," he added.

	    He said the market remains competitive, with price rises unlikely during the remainder of the year. 

	    Wilson Mok, director of Inchcape Motors Ltd, also said that he does not 

foresee any major price increase in the next 10 months.

	    He said that car prices will be affected by developments in the yen, as about 75 pct of cars sold in Hong Kong are imported from Japan.

	    Taikoo Motors managing director K W Lam said he expects the price for motors to fluctuate by 5.0 pct during the year.

	    "At best, prices will stay flat until towards the end of the year ... A price rise is seen as unlikely given the uncertain economic outlook over the region," Lam said.

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