2011 another year of record
volumes
Auto sales increased by 13.6% y-y in 2011, registering another record year. Although there has been some ease in demand in 2H11 over 1H11 (on a seasonally adjusted basis), the pace of demand remained strong especially in 4Q11, despite the tax hikes in October.
We expect 20% decline in Turkish demand in 2012
We expect a 20% y-y decline in domestic demand in 2012 with an expected decline in GDP growth from 7.7% y-y in 2011E to 2% in 2012. Auto demand has continuously surprised on the upside since 2009, and further upside risk is possible. Yet given the risk of a credit squeeze, we believe the risks are fairly balanced.
1H12 will be challenging; we prefer Tofas over Ford Otosan
The strength of auto sales in December was driven by a surprising negative trend in interest rates for auto loans, supported by interest subsidies provided by the auto companies, in our view. 1H12 will be especially challenging, with a strong base impact, and we believe better entry points for the sector might emerge. However, overall, we remain positive on the sector, with low car ownership as the most important driver of demand. The auto sector is among those favoured by the government, therefore we do not expect it to employ aggressive measures to curb demand. Since the beginning of 2011, Tofas underperformed Ford Otosan by 32%, mostly on divergent performances on exports. Tofas’ higher exposure to combi vans, which witnessed a 5ppt increase in taxes in Turkey, and more visible dividend prospects of Ford Otosan were the other drivers of the performance gap. For Ford Otosan, we believe on a relative basis, the market is underplaying the risk that volumes from new markets (US, Brazil and Russia) may not be sustainable over the mid term. Moreover, we believe Ford Otosan’s market share gain in 4Q11 might have been at the expense of margins. We prefer Tofas over Ford Otosan. Concrete developments on a government-incentivised passenger-car investment by Tofas could be among potential catalysts, whereas market caution on enforcement of take-or-pay contracts might create volatility in the share price.
Auto sales increased by 13.6% y-y in 2011, registering another record year. Although there has been some ease in demand in 2H11 over 1H11 (on a seasonally adjusted basis), the pace of demand remained strong especially in 4Q11, despite the tax hikes in October.
We expect 20% decline in Turkish demand in 2012
We expect a 20% y-y decline in domestic demand in 2012 with an expected decline in GDP growth from 7.7% y-y in 2011E to 2% in 2012. Auto demand has continuously surprised on the upside since 2009, and further upside risk is possible. Yet given the risk of a credit squeeze, we believe the risks are fairly balanced.
1H12 will be challenging; we prefer Tofas over Ford Otosan
The strength of auto sales in December was driven by a surprising negative trend in interest rates for auto loans, supported by interest subsidies provided by the auto companies, in our view. 1H12 will be especially challenging, with a strong base impact, and we believe better entry points for the sector might emerge. However, overall, we remain positive on the sector, with low car ownership as the most important driver of demand. The auto sector is among those favoured by the government, therefore we do not expect it to employ aggressive measures to curb demand. Since the beginning of 2011, Tofas underperformed Ford Otosan by 32%, mostly on divergent performances on exports. Tofas’ higher exposure to combi vans, which witnessed a 5ppt increase in taxes in Turkey, and more visible dividend prospects of Ford Otosan were the other drivers of the performance gap. For Ford Otosan, we believe on a relative basis, the market is underplaying the risk that volumes from new markets (US, Brazil and Russia) may not be sustainable over the mid term. Moreover, we believe Ford Otosan’s market share gain in 4Q11 might have been at the expense of margins. We prefer Tofas over Ford Otosan. Concrete developments on a government-incentivised passenger-car investment by Tofas could be among potential catalysts, whereas market caution on enforcement of take-or-pay contracts might create volatility in the share price.
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