Abstract
New vehicle sales in the Czech Republic fell nearly 12.5% year-on-year
(y-o-y), down to 92,100 units, in
H109, according to estimates from the
country' s Car Importers Association (CIA). The decline comes as a
result
of a 60% y-o-y fall in sales in the light commercial vehicle (LCV) segment,
which accounted for
close to 14% of total vehicle sales in June.
Passenger car sales contribute nearly 85% of the total new vehicles sold in
the Republic. The government
had already announced a cut in car VAT with
effect from April 1 2009 in an attempt to boost sales on
new purchases.
The news could not have been better for consumers as the tax cut, along with
sales
incentives offered by car dealers meant that news cars were
retailing at less than imported used cars. The
result was a 7.9% y-o-y
increase in new car sales, up to 79,228 units, in June. Meanwhile, sales
of
second-hand imports fell 41% y-o-y to 71,411 units. Demand for the
latter was further hampered by the
weakened koruna against the euro.
However, commercial vehicle sales were hampered by slowing economic activity
in the country. This
contracted 3.4% in Q109, according to estimates from
the Czech Statistical Office, meaning the country
had entered recession.
Only 12,872 commercial vehicles, almost 7,700 fewer LCVs, were sold in
June,
which more than offset the increase in passenger car sales. The
Czech economy is on track for a 3.1%
contraction of real GDP in 2009, as
the collapse of export demand and FDI inflows feeds through to a
modest
contraction of domestic demand. However, we reiterate that the economy
continues to display
resilience in the face of Europe-wide recession,
principally thanks to the relatively stable financial
system. This put the
country is a strong position for economic recovery when global demand
returns
Meanwhile, in July 2009, President Václav Klaus vetoed a
planned scrappage scheme, after it was passed
by the parliament. According
to Klaus, as reported by Autocar, the scheme ‘favours industry at
the
expense of other sectors of the economy and within that it gives
preference to short-term interests of
several strong players from the
automotive industry.’ Scrappage programmes have been implemented in
many European countries and have helped to boost new car sales. However,
critics the claim the scheme
would have placed too great a drain on public
resources on cities in the Czech Republic. If implemented,
it would have
allowed the public to trade in their own cars and receive EUR1,000 towards a
new one. It is
estimated the package would have cost CZK40.00bn
(EUR1.41bn) including the cost of other measures
such as cuts in
companies' social tax payments to reduce the cost burden on firms of
maintaining
employment.
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