US slowdown may hit Japan car makers - Fitch

23 January 2008 04:18  [Source: ICIS news]

SINGAPORE (ICIS news)--Signs of a slowdown in the global economy could have a negative impact on Japanese car makers which are exposed to the US market, analysts from Fitch Ratings said on Wednesday.

However, the three big Japanese auto makers – Toyota, Honda and Nissan – were gaining a larger market share in the US which could mitigate the negative impact, analyst Tatsuya Mizuno said in a teleconference.

He added that it was difficult to tell the extent of the impact as it was unclear how long the credit crunch in the US would last.

Besides the US slowdown, a rising yen and rising costs of raw materials such as steel could also affect earnings at the big three, Mizuno said.

More plastics are being used in cars to reduce weight and cut steel costs.

Each US-manufactured light vehicle on average contains 338 pounds of plastics and composites, or 8.4% of the vehicle’s weight, a study by the American Chemistry Council (ACC) showed. This was 18% higher than in 2000.

In South Korea, car makers such as Hyundai and Kia would benefit from expansions overseas which would reduce costs, trade frictions and provide easy access to local markets, analyst MiKyung Kwon said.

The country’s car demand would dip to 5% in 2008 from 6% a year ago, mainly driven by replacement demand, she added.

Car sales in India and China are expected to continue growing at double digits in 2008, albeit at a slower rate compared with 2007 as interest rates rose, Fitch said.

Chinese auto sales will surpass 8.8m units in 2007, a 22% rise compared with the previous year, analyst Matthew Wong said.

“The pace might slow down slightly due to a much larger base figure for comparison – as well as increasing fuel prices and interest rates,” he added.

Vehicle sales were likely to hit 10m units in 2008, maintaining a 15-20% growth, Kong said.

Medium-sized cars will remain the major driving force as distorted fuel prices and taxes failed to curb the Chinese’ appetite for larger cars, he added.

In India, growth rates have slowed in fiscal 2008 (to year-ended 31 March 2008) on tighter liquidity and higher interest rates, but it would pick up again next year due to new product launches, Fitch said.

 The auto sector was expected to grow at 10-12% in the medium term, down from the 18% compound annual growth rate over the past five years, it added.

By: Florence Tan
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