Car sales market may hit rock bottom in 2021

New vehicle registrations are expected to contract 20.1% in 2019.

Singapore's vehicle sales market is poised to grind to a halt by 2021 as the city continues to rank as one of the most expensive places to own a car, according to Fitch Solutions.

New vehicle registrations are expected to crash 20.1% in 2019 which is significantly higher than the -11% contraction estimated for 2018. Consequently, the firm expects this trend to bleed into 2020-2021 and decline at an annual average rate of -25.4%.

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“At this point we believe that the market will bottom out, reaching annual new registrations of just under 46,000 units which represents less than half of the 116,148 new registrations at the market’s most recent peak in 2017,” Fitch Solutions said.

Meanwhile, the country’s slowing economic growth, rising interest rates paired with the escalating US-China trade tensions will further erode the likelihood of large-scale consumer spending such as new vehicles despite the firm’s bright outlook for Singapore’s private consumption.

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The rise in ride-sharing demand could mitigate some of the pressures brought about by the current contraction period, Fitch Solutions said.

“However, we don’t believe that the demand for vehicles from ride-share service providers will persist to the same extent over the remainder of our forecast period,” the firm noted. “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.”