Hong Kong Autos Report Q1 2013

We estimate automotive sales growth picked up in 2012, with sales growing by 2.14% to 36,391. Thisstands in positive contrast to 2011, which had disappointing growth of only 0.36%. Nevertheless, theseslow growth figures should not cause too much concern. Hong Kong's automotive market is mature andsaturated even by global standards. The local government actively tries to limit car ownership in what isone of the world's most densely populated areas. The overwhelmingly dominant part of Hong Kong'sauto market will continue to be passenger vehicles. In 2012 passenger car sales are estimated to havetotalled 33,400, which is just under 89% of all total vehicle sales in the city province. The potential forrapid growth is limited and at BMI we expect sales to reach only 43,219 by the end of our forecastingperiod in 2017. This indicates that growth is set to average around 3% over the coming years.

Sales of luxury vehicles, particularly those at the very top of the market, fell in Hong Kong over thecourse of 2012. Bloomberg reports that the country's market of ultra-luxury vehicles - such asLamborghinis, Ferraris and Bentleys - began to suffer as the mainland's economy experienced aslowdown in growth. Furthermore, unlike other luxury goods, luxury car sales are not distorted byvisiting Chinese consumers. This drop off reflects uncertainty among the wealthiest Hong Kong residentsand follows an unusually successful first half of the year, as sales in H112 grew to 273 units - up from186 in H111. Analysts believe that the decreasing sales in the latter part of the year can be traced back tofalling merger and acquisitions activity in Asia.

The price of parking space in Hong Kong rocketed in 2012, according to latest figures. The average priceof a parking spot in a residential complex reached US$82,600 in Q312. A record has been set with onespot in the Repulse Bay neighbourhood of Hong Kong sold for US$387,000. Bloomberg reports that thereare fears, however, that this is merely the latest investment bubble in Hong Kong. Recent laws institutedto limit increases in the cost of residential property have driven investors into other markets, includingparking space in one of the world's most crowded cities. Non-Hong Kong buyers - who are primarilyfrom the mainland - were subjected to a special tax, which has had the desired effect of bringing downrising rapidly prices.

The E-Class from Mercedes-Benz was Hong Kong's most popular vehicle over the first 10 months of2012, according to figures from the city's automotive industry association. 1,916 units were sold January- October 2012, quite comprehensively beating the 1,549 units of the BMW 5 Series which came in atsecond place. These figures amply demonstrate the dominance of high-end cars in Hong Kong's carmarket, with three of the five best sellers luxury models. The non-luxury models were the Toyota Hiace,at 1,537 units, and the VW Golf with 1,033 sales.