2014-01-03 12:06:37 - Fast Market Research recommends "Israel Autos Report 2014" from Business Monitor International, now available
BMI holds a cautiously optimistic stance on the outlook for Israeli new vehicle sales as we enter 2014. The past year has been fairly positive for new passenger car sales, which were up by 4% as of end-October 2013 (most recent data available as this report was being compiled), at 184,305 units, according to figures from the Israeli Vehicle Importers Association (IVIA).
This headline figure was made up of 150,364 passenger cars, 20,689 sport utility vehicles (SUVs), 10,019 vans and 3,233 pick-ups. Separately, truck sales (over 3.5 tonnes) totalled 7,292 units over the 10-month period, with bus sales standing at 1,857 units over the first nine months of the year. This makes for a total of 193,454 new vehicles sold over
the first 10 months of 2013. On current trends, this would imply total new vehicle sales of 231,820 units in 2013, an increase of around 8% y-o-y. Across 2013, a stronger economic backdrop and somewhat calmer security situation both helped to push new vehicle sales higher, even despite the impact of changes to car sales taxes imposed by the government.
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BMI believes that passenger car sales growth in 2014 will be slower than that for commercial vehicles, which could benefit from direct and indirect business activity associated with the start of natural gas production in the Tamar gas field. Turning to the wider macroeconomic backdrop, BMI's Country Risk team is targeting 3.2% GDP growth for Israel in 2014. We believe that the domestic economy will remain in a soft patch, with continued austerity measures hitting private consumption hard. As such, we expect economic expansion to remain sluggish over the coming quarters.
With regard to demand for private vehicles, we are expecting a slowdown in private consumption over 2014, to 3% growth, from 3.5% estimated for 2013. Other leading indicators continue to paint a relatively mixed picture of the domestic economy. The Bank Hapoalim's Purchasing Managers Index continues to decline steadily, having come in at 44.9 points in September 2013. Conversely, Bank Hapoalim's Consumer Confidence Index increased for the fourth consecutive month in September 2013 on the back of gains on the capital market and continued stability in the labour market. Labour force survey data for August 2013 indicate a 0.1% decline in the unemployment rate to 6.1%, although the rate increased by 0.2% to 5.4% among the prime working ages. We expect the unemployment rate to remain above the 6.0% level in 2014. One bright spot for Israeli customers seeking loans to finance new car purchases is that we expect a benign inflation environment to continue, with average CPI only set to increase by 0.3%, to 1.9% in 2014. As such, we believe there is scope for the Bank of Israel to cut interest rates by a quarter of a percentage point over 2014, with the key policy rate set to stand at 0.75% at end-2014.
Looking beyond 2014, our medium-term outlook on the Israeli economy, and by extension new vehicle sales, is more optimistic. We expect real GDP growth to average 3.7% per annum over the 2013-17 period. Accelerating economic growth in the US and the eurozone from 2014 onwards and the beginning of natural gas exports will benefit the external sector, as well as support growth in fixed investment. We also believe that fiscal policy will slowly become more expansionary over the forecast period, supporting private consumption growth. As such, from just 2% growth in 2014, we believe that new vehicle sales growth can quicken, to around 5% annual growth, by 2017.
Elsewhere in the sector, Israel remains a key manufacturer of specialised motor parts and technology, notably within the fast-growing area of telematics. As such, while not a major vehicle production base, BMI believes that Israel will remain a hotbed of technological development for the autos industry and should expect to see further inward investment over our forecast period to 2017.
One setback for the local auto industry was the news in May 2013 that local electric battery charging network operator Better Place had filed for bankruptcy. This news has certainly thrown the near-term outlook for future electric vehicle (EV) use in Israel into severe doubt. Better Place had been trying to develop national networks of fast-charging battery stations and also 'battery swap stations', where owners of electric vehicles could swap their depleted battery for a fully-charged one.
However, customer demand for this type of electric vehicle use was far lower than the company expected, with some reports stating that fewer than 1,000 Renault Fluence EVs (Renault was the main carmaker that bought into the Better Place business model) had been sold in Israel and around a further 400 units in Denmark. As such, with the company having reportedly spent millions of dollars in developing its products and charging infrastructure, bankruptcy was inevitable.
Looking at the most recent sales data (for January-October 2013), Hyundai Motor remains the dominant player on the Israeli new light passenger vehicle market, selling 29,050 units for a market share of 15.8%. In second place is Toyota Motor on 18,281 units (9.9%), followed by Kia Motors on 18,228 (9.9%).
Among the leading sellers of HCVs on the Israeli market are German truckmaker Mercedes-Benz, alongside Dutch truckmaker DAF and Swedish truckmaker Volvo Trucks. Looking at bus sales, Mercedes-Benz is by far the dominant seller, selling 619 units over the Jan-Sep 2013 period, for a market share of 33.3%. In second place is Volvo on 273 units (14.7%), followed by MAN on 254 (13.7%).
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