Taiwan Car show in Taichung, 2013. (Photo/Huang Kuo-feng)
The price of automobiles is expected to drop in Taiwan if the Japanese currency continues to depreciate due to a monetary easing policy, according to US brokerage Morgan Stanley.
Taiwanese auto companies mainly source components and vehicles from Japan and, thus, may benefit from the yen's depreciation, Morgan Stanley said in a research note dated Jan. 28.
In addition, Taiwan's government has noted that it may ask companies benefiting from the yen's depreciation to lower their selling prices, the brokerage said.
"Our checks suggest that the consensus among auto companies is that they may consider adjusting prices once the yen depreciates against the US dollar to the 95 to 100 level," said Terence Cheng, a Morgan Stanley analyst in Taipei.
"Longer term, we believe a depreciating yen could still help ease cost pressures on Taiwan auto companies or halt the requests by Japanese suppliers to raise prices that were seen during the period the yen was appreciating," he wrote in the note.
Taiwan-based China Motor, which purchases autos and parts from Mitsubishi Motors of Japan and pays in yen, may become the major beneficiary of the yen's depreciation, Cheng said.
However, another Taiwanese sales agent, Hotai Motor, which purchases from Japan's Toyota Motors and pays Toyota in US dollars, is unlikely to see any direct benefit from the yen's depreciation, Cheng added.
The Japanese yen traded mostly at under 80 yen to the US dollar from mid-July 2011 to mid-November 2012, but has since shattered the 80 yen barrier.
The Japanese currency hit a 30-month low of 92.79 yen (US$1) to the greenback on Feb. 1 after Japanese prime minister Shinzo Abe said a yen level of around 90 yen to the dollar would benefit Japanese exporters and called for a higher inflation target.
Also, officials of the Bureau of Foreign Trade said on Jan. 29 that they would invite importers of Japanese automobiles, cosmetics, clothing and electronics to a meeting in which they will be asked to lower their prices to reflect the weakening Japanese yen.
Hotai spokesman Yu Shiao-chung told CNA that the company had informed their Japanese suppliers about concerns resulting from the weakening yen, but has yet to receive a response.
"It appears to be too early to consider a price cut," he said.
Yu added that price hikes of 1% for Hotai vehicles scheduled for March 1 will remain in place, and that the company will extend a promotion, originally to end Jan. 31, to continue until the Lunar New Year holiday begins Feb. 9.
Nissan Taiwan, meanwhile, said if Nissan cuts prices, along with parts and components suppliers, it will then adjust prices accordingly, local newspaper United Daily News reported last week.