Excise tax boost not expected to rust auto sales
An excise-tax increase of two percentage points from the current rate of about 4% on domestically produced cars is not expected to worsen the country's slumping auto market, an industry analyst said last week.
"The main problem is with Daewoo," said Wojciech Drzewiecki, head of automotive research company Samar. A combination of bad press and an uncertain future has contributed to poor sales for Daewoo, which has been one of the leaders in the auto market, he added.
From January to February, Daewoo sold some 15,808 vehicles, a 32% decrease from last year's sales of 23,395 during the same period. The result was an overall 9.33% decline in the auto market, almost 80% of which can be attributed to Daewoo. In January and February, Daewoo held approximately 19% of the auto market as compared to a total market share of about 300% at the same time last year.
The overall market drop for March is expected to lessen to about 6%, although Drzewiecki said Samar has not yet released its March figures.
Drzewiecki also said last week's excise-tax hike to 6% for domestically produced cars and 6.4% for imports, which applies to smaller vehicles with engine sizes of two liters or less, would not result in further significant sales decreases as earlier tax boosts had little impact on sales. In January, the excise tax on domestically produced vehicles with an engine capacity of up to two liters increased by two percentage points, up from 2%. On domestically produced vehicles with an engine capacity of more than two liters, the excise tax increased by five percentage points to 15%.
But this excise-tax hike was responsible for only a 1% decrease in sales since the beginning of the year, Drzewiecki said. "There was no big difference at the beginning of the year because there were still cars (sold) that were built in 1999," he said.
And the latest excise-tax increase is also not seen as worsening further projected sales slumps. Along with Daewoo's situation, other factors that could account for the decrease in auto sales are fuel prices and insurance premiums, Drzewiecki said.
He noted, however, that if Daewoo holds its course and convinces consumers that it will remain on the market, particularly with parts accessibility, then the Korean car maker's situation is expected to improve.
Choon Sik Yoo, president and CEO of Daewoo-FSO Motor and Daewoo Motor Poland, predicted record sales of as many as 14,000 cars in March alone.
"I don't see any (reason to) worry about the situation," Yoo said about Daewoo's new year slump. He also mentioned recent changes that took place in Daewoo's retail organization, Daewoo Centrum.
"We found that communications between production and sales were not so good," Yoo said. As a result, sales will be controlled by Daewoo's Zeran-FSO plant.
