The contraction in vehicle sales will accelerate next year and hit rock bottom in 2021 despite an improving consumer outlook and a rise in ride-sharing demand, said a Fitch Solutions report yesterday.
It noted that the drop in new vehicle registrations will worsen sharply from an estimated 11 per cent contraction this year to 20.1 per cent next year.
In the longer term, new vehicle registrations will continue sliding, contracting at an annual average rate of 25.4 per cent over 2020 and 2021 before bottoming out.
At that point, Fitch Solutions analysts believe the market will touch annual new registrations of just under 46,000 units, less than half of the 116,148 seen at the market's last peak last year.
This is due to the very cyclical nature of vehicle sales here and the extremely high cost of car ownership, Fitch says.
Singapore's consumer market has been on the upturn, buoyed by wage growth and low unemployment, but may see slowing expansion in the wake of trade tensions, rising interest rates and a pick-up in imported inflation, it added.
This will further erode the likelihood of consumers making larger purchases, such as new vehicles.
A rise in ride-sharing demand may also have mitigated some of the pressures during this contraction.
However, Fitch analysts said the demand for vehicles from ride-share firms is unlikely to persist to the same extent over the remainder of their forecast period as Uber agreed to sell its South-east Asia business unit to its main rival, Grab.
"We believe that this will diminish the pace at which vehicles will be purchased for ride-sharing purposes as there will be less competition and therefore less urgency to expand operating fleets in the country", they wrote.