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|