Industry Trend Analysis - Waning Wealth Effects And Rising Borrowing Costs To Dampen Sales - APR 2018

BMI View: Rising interest rates and the negative wealth effects from a cooling housing market will weigh on household spending and in turn growth in the new car market in Hong Kong. As a result, we forecast growth of 4.3% in passenger car sales in 2018, a slowdown compared to the 7.9% expansion recorded in 2017.

We expect to see a slowdown in growth in new car sales in Hong Kong in 2018 as rising borrowing costs and the negative wealth effects stemming from a cooling property market weigh on household spending. Given these considerations, we forecast growth of 4.3% in new passenger car sales in 2018, reaching a total of around 41,000 units.

Our Country Risk team expects Hong Kong's real GDP growth to cool to 3.0% in 2018 from 3.8% in 2017, as slowing mainland Chinese economic growth and rising interest rates will weigh on the city's economic activity over the coming quarters ( see 'Slower Expansion In 2018', February 28). We expect the city-state's weaker growth outlook to negatively impact consumer confidence and discourage spending, which will be reflected in slower growth in the new vehicle market in 2018.

Growth In New Car Sales To Wind Down
Hong Kong - Passenger Car Sales, Units
f = BMI forecast. Source: Hong Kong Department of Transport, BMI

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