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Singapore’s new vehicle sales fell by 9% in 2008, although industry representatives believe it could have been much lower. BMI’s recently published Singapore Automotives Report examines the extent to which the issuing of Certificates of Entitlement (COE) have impacted the market. Anecdotal evidence from local dealers suggests that sales could have been lower, but a crash in the premiums on COEs in December suggested that the certificates were in oversupply. Local press reports also added that the Singapore Vehicle Traders Association and the Automotive Importers and Exporters Association have appealed to the government to cut back on the number of COEs issued. Indeed, Motor Traders Association president Tan Kheng Hwee stated that she expects the number to be cut back from April 2009 onwards.

The outlook for the market appears mixed at present, with opportunities for strong sales in terms of low COE prices and new models weighed against recession conditions and dealer downsizing. At present BMI forecasts a rise of 3% in total vehicle sales, based on a strong start to the year fuelled by incentives and low COE premiums carried over from last year. While the average premium on COEs is expected to stay lower in the early months of 2009, sales should also be boosted by incentives aimed at clearing stockpiled inventories, as well as a number of new launches scheduled for this year and lower fuel prices.

Indeed, BMI’s Business Environment Rating for the automotive industry in Asia Pacific leans towards the more positive scenario, as Singapore has climbed two places to rank 12th with a rating of 45.2, compared to 42.7 in the previous ratings, with an increase in its country risk ratings. Singapore, along with Thailand, has the highest number of free trade agreements completed for any Asian market. However, in industry terms, the lack of domestic production facilities and the imposition of vehicle quotas, which restrict potential sales growth, weigh on the market’s overall rating.

The market continues to attract major multinational brands. In 2008, Toyota (including Lexus) continued its dominance of the passenger car segment with a 25.49% market share. Honda made gains to close right in on its compatriot, with a 25.26% market share. There is then a significant drop to Mitsubishi in third with 7.05% of the market. Of note are the gains made by China’s Chery, which has remained in the top 20 since climbing in 2007. Chery has stayed in 17th as its sales were slightly lower than 2007. Malaysia’s Proton and Perodua are also in the top 20, suggesting that their strategy to offset lost domestic market share through expansion could be paying dividends.