Slump in Singapore vehicle sales to worsen in 2019, hit rock bottom in 2021: Fitch

In the longer term, new vehicle registrations will continue sliding, contracting at an annual average rate of 25.4 per cent over 2020-2021 before bottoming out.
In the longer term, new vehicle registrations will continue sliding, contracting at an annual average rate of 25.4 per cent over 2020-2021 before bottoming out.PHOTO: ST FILE

SINGAPORE - The contraction in Singapore vehicle sales will accelerate in 2019 and hit rock bottom in 2021, despite an improving consumer outlook and a rise in ride-sharing demand, said a Fitch Solutions report released on Friday (Nov 23).

Fitch Solutions expects that the drop in new vehicle registrations will worsen sharply from an estimated 11 per cent contraction in 2018, to 20.1 per cent in 2019.

In the longer term, new vehicle registrations will continue sliding, contracting at an annual average rate of 25.4 per cent over 2020-2021 before bottoming out. At that point, the analysts believe the market will touch annual new registrations of just under 46,000 units, less than half of the 116,148 new registrations seen at the market's last peak in 2017.

This is due to the very cyclical nature of vehicle sales in Singapore and the extremely high cost of vehicle ownership in the country, Fitch analysts say.

Singapore's consumer market has been on the upturn, buoyed by wage growth and low levels of unemployment, but may see slowing economic growth, the result of US-China trade tensions and rising interest rates, along with a pick-up in imported inflation, weighing on consumer sentiment and cap spending, said Fitch. This will further erode the likelihood of the Singaporean consumer making larger purchases, such as new vehicles, it added.

A rise in ride-sharing demand may also have mitigated some of the pressures during the current contraction. However, the analysts said the demand for vehicles from ride share service providers 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.