July 19, 2011 -
PRLog -- With new vehicle sales in Hong Kong increasing close to 38% year-on-year (y-o-y), to 36,141 units, during the first 11 months of 2010, BMI believes the autos market broadly reflects the overall level of economic activity in the country. In Q210, the country's real GDP growth figures stood at 6.5% y-o-y and 1.4% quarter-on-quarter (q-o-q) on a seasonally adjusted basis, thanks to broad-based growth with private consumption and business investment. However, BMI points out that the most important indicator for gauging economic activity in Hong Kong is the import-export sector, which by itself accounts for a staggering 40% of GDP. Activity in this sector is largely a function of total trade volumes, which have so far continued to impress. But Hong Kong's dependence on global trade could weigh on the economy in the next few months. The latest data on the world's three largest economies - the US, China and Japan - are all pointing towards slower global growth. As such, BMI's Macroeconomic Team is currently forecasting Hong Kong's economic growth slowing down to 1.5% y-o-y during 2011, to be followed by an average 3.7% growth between 2012 and 2015. In line with this view, BMI forecasts auto sales to reach only 38,000 units by 2014, falling slightly short of complete recovery to pre-crisis level of 2008. However, opportunities lay in the adoption of 'clean energy' vehicles which the authorities are promoting with the view to cutting back on pollution. Hong Kong's Environment Bureau will perform a three month trial on electric vehicles (EVs) in an effort to attract electric carmakers to the country. From the perspective of carmakers this also creates opportunities for higher sales if existing car owners switch to new technologies. The first trial will be carried out on Japanese automaker Toyota Motor's Prius hybrid in January 2011, to test its operational performance. However, the government's policy of these vehicles with the exemption of the First Registration Tax Waiver will not increase sales seriously until the expanded charging infrastructure is in place. Limits on vehicle sales growth and the lack of local automotive production places Hong Kong at the second last position of BMI's Risk-Reward Ratings for the autos industry in Asia with a score of 46.6 points. Despite its favourable scores in long-term economic and political risk and regulatory environment, we see little possibility of improvement in rankings as the prospect of vehicle production remains off the cards.
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