Expected growth cycle to boost Singapore vehicle sales in next 4-5 years: Fitch Solutions

SINGAPORE'S vehicle sales volumes can expect a "strong boost" from an anticipated growth cycle over the next 4 to 5 years, a report by Fitch Solutions Country Risk & Industry Research stated on Thursday (Jan 13).

Based on the company's risk-reward indicator (RRI), Singapore obtained the highest score in Asia at 77.3 out of a possible 100. The country ranked first out of 23 Asian markets and seventh globally. This score is attributed to the low political risk in Singapore that improves the stability and sustainability of car retail operations in the market, the report said.

Japan, South Korea and Taiwan are also among other countries in Asia that enjoy lower political risk, and therefore rank highly in Fitch's regional RRI.

Overall, the research house highlights that Asia ranks second globally as a region in its Autos Sales RRI. This suggests that Asia "offers a good mix of high-growth markets while also boasting high volume and well-developed markets with much lower risks" - hence allowing automakers to establish a regional supply chain while generating a stable stream of revenue, it said.

Fitch also believes that Asia's large markets for vehicle sales in China, India and Japan add to the attractiveness of the region as a vehicle retailing destination. The large underlying driving-age population also presents an opportunity for automakers, in the research house's view.

Despite high tax rates, financial barriers to entry and increasing competition in Asia, Fitch foresees automakers will be able to enjoy a more favourable industry environment as free trade agreements continue to expand in the region.

"Additionally, we note that strong demand for electric vehicles in markets such as China, Hong Kong, South Korea, Australia and New Zealand will aid the continued growth of the region's vehicle sales over 2022," added the research house.

Fitch Solutions nonetheless expects Asia's vehicle sales to "enter 2022 in a weaker position" due to the new Omicron coronavirus variant and its associated restrictions that prevent consumers from buying vehicles. Global semiconductor shortage also continues to impede vehicle sales growth potential, in its view.