The ASEAN automotive sector is now bouncing back from the devastating economic crisis of 1997/1998 which crippled the region’s automotive industry, according to a new report from the Economist Intelligence Unit (EIU) “The automotive industries of Asia-Pacific: prospects for ASEAN and the emerging markets to 2005.” After falling by 63% in 1998 to a third of peak 1996 levels, new vehicle sales in the ASEAN region recovered strongly in 1999 – up by 49%. The EIU predicts the recovery will continue, albeit at a slower pace, but warns that there are still a number of economic and political barriers to overcome before stability is ensured.
The ASEAN automotive sector is now bouncing back from the devastating economic crisis of 1997/1998 which crippled the region’s automotive industry, according to a new report from the Economist Intelligence Unit (EIU) “The automotive industries of Asia-Pacific: prospects for ASEAN and the emerging markets to 2005.” After falling by 63% in 1998 to a third of peak 1996 levels, new vehicle sales in the ASEAN region recovered strongly in 1999 – up by 49%. The EIU predicts the recovery will continue, albeit at a slower pace, but warns that there are still a number of economic and political barriers to overcome before stability is ensured. Average annual growth to 2005 is forecast at 16%, led by commercial vehicles with average growth of more than 19% each year. (Commercial vehicles accounted for just under half the market in 1999, and are forecast to increase this share to just over 51% by 2005.) But total sales are not expected to recover their pre-crisis volumes until after 2005.
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| ASEAN vehicle sales by type, selected years 1996-2005a | ||||||||
| Passenger cars | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2003 | 2005 |
622,890 | 625,108 | 264,952 | 392,498 | 491,830 | 538,460 | 619,600 | 716,300 | |
| Commercial vehicles | 886,857 | 718,185 | 232,477 | 348,720 | 475,360 | 554,400 | 667,020 | 754,480 |
| Total vehicles | 1,509,747 | 1,343,293 | 497,429 | 741,218 | 967,190 | 1,092,860 | 1,286,620 | 1,470,780 |
| a Figures or 1996-99 are actual; the remainder are forecasts. | ||||||||
| Source; Industry sources; EIU forecasts. | ||||||||
Progress has not been evenly spread, however, with recovery still very tentative in some key markets. Malaysia and Thailand have so far experienced the most robust recovery among the region’s developing markets, with replacement demand in Singapore also benefiting from a strengthening economy. The Singapore vehicle market is set to rise to record levels in 2000, before entering a cyclical decline in the second half of 2001. The table below gives actual and forecast sales for each country.
| ASEAN vehicle sales by country, selected years 1996-2005a | ||||||||
| Indonesia | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2003 | 2005 |
337,399 | 382,301 | 58,317 | 94,376 | 167,000 | 203,000 | 247,000 | 271,000 | |
| Malaysia | 364,789 | 404,831 | 163,850 | 288,547 | 348,100 | 390,500 | 445,000 | 493,000 |
| Philippines | 162,944 | 143,718 | 79,988 | 73,871 | 86,910 | 98,500 | 125,820 | 147,080 |
| Singapore | 34,256 | 34,766 | 37,530 | 49,501 | 71,000 | 59,000 | 44,000 | 49,000 |
| Thailand | 585,958 | 358,836 | 144,097 | 218,372 | 273,000 | 316,000 | 392,000 | 472,000 |
| Vietnam | 10,401 | 8,841 | 8,647 | 10,051 | 12,180 | 14,360 | 17,800 | 20,700 |
| Othersb | 14,000 | 10,000 | 5,000 | 6,500 | 9,000 | 11,500 | 15,000 | 18,000 |
| Total | 1,509,747 | 1,343,293 | 497,429 | 741,218 | 967,190 | 1,092,860 | 1,286,620 | 1,470,780 |
| a Figures for 1996-99 are actual; the remainder are forecasts. b Includes some estimates. | ||||||||
| Sources: Industry sources; EIU estimates and forecasts. | ||||||||
Indonesia was the hardest hit in 1998 with political and social upheaval adding to the economic difficulties. The ongoing political instability and the danger of disintegration have discouraged foreign investors from supporting the current tentative recovery in the country’s economy. However, the report predicts that Indonesia will lead the growth in the car market-albeit up from extremely depressed levels-in 2000.
Similarly, the Philippines is still in a tentative recovery phase and the outlook has not been helped by recent political and stock market events. The EIU predicts a slower recovery in vehicle demand, with car sales strengthening in the second half of 2000.
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By GlobalDataVietnam is experiencing strong growth in vehicle sales, particularly domestic sales, as the beneficial effects on the local industry of earlier restrictions on imports begin to filter through.
Other findings of the report
The diverging interests of the key member states have delayed the full implementation of the ASEAN Free Trade Agreement (AFTA). Malaysia has now delayed full AFTA inclusion until 2005, and is likely to be sidelined as other member states move ahead on a bilateral basis. The agreement provides for a maximum import tariff of 5% for products which are considered ASEAN-made, or with a minimum regional content of 40%. This should, in theory, reduce prices of current models traded in CBU (completely built-up) format within the region and trigger much greater competition. It will also encourage consolidation of vehicle assembly in order to reduce operational duplication, although for existing players this process is likely to be more gradual.
The takeovers of Nissan by Renault and Mitsubishi by DaimlerChrysler, and the integration of other players, such as Volvo and Land Rover into larger groups means that capacity requirements and production and marketing strategies will be subject to significant change.
Malaysian models hold top three positions in the ASEAN car market…
Three Malaysian models-the Proton Wira, the Perodua Kancil and the Proton Saga/Iswara-are the top sellers in the ASEAN market, almost entirely due to their strong dominance of the Malaysian car market. Very little is exported to other ASEAN markets. Toyota’s Corolla and Honda’s Civic are the next most popular in terms of total sales volume, but they are also the most widely sold cars in the region, with a presence in all markets.
…while pickups from Thailand top the commercial vehicles ranking
The Isuzu pickup and the Toyota Hilux pickup, both built in Thailand, lead the ASEAN commercial vehicle market. They are followed by the Toyota Kijang, the largest-volume vehicle in Indonesia, and the Daihatsu Terios.
Japanese cars dominate
Apart from the Malaysian manufacturers, only three non-Japanese cars-BMW 3-series, Kia Sephia and Hyundai Accent/Excel-are represented in the top 20 selling models in the ASEAN region. Two of these are Korean models which are based on Japanese technology, as are the Malaysian products. This leaves only BMW as a true non-Japanese contender, reflecting the slowness of the European and US manufacturers to take up the challenge of the region.
The region’s fragmented markets have been a key barrier to entry, and protectionism, such as local content regulations, has limited the potential to mount a significant challenge against the Japanese dominance. The scrapping of local content regulations in most markets from January 2000, and an integrating regional market, should help non-Japanese manufacturers to gain a stronger foothold in the market. Nonetheless, in order to benefit from low AFTA tariffs, they are still required to achieve regional content-which will continue to hinder some newcomers.
The lower-medium C-segment will continue to account for the lion’s share of the ASEAN passenger car market – but lower segments will grow rapidly
To date, vehicle manufacturers have concentrated most of their efforts on the C-segment-compact family cars such as the Honda Civic and City and Toyota Corolla-predominantly because it offers the best combination of providing value to their customers while also securing reasonable margins and volumes for themselves. However, the report predicts that lower segments will grow rapidly as manufacturers offer smaller cars to more markets in the region. Suzuki has already launched the small Wagon R model into Indonesia which has been met with very significant market demand. C-segment sales amounted to over 66% in 1999, but are predicted to fall to just over 60% in 2005.
Improving corporate health will help D segment growth. The report predicts that the larger saloons in the medium D segment will have recovered the volumes lost during the crisis by 2005 as corporate purchasing recovers and as wealth in general improves across the region. European manufacturers such as BMW and the Volkswagen Group will strengthen their presence as they establish regional assembly facilities, says the report. Similarly, the report predicts that the luxury E & F segments will also grow strongly from this year, after their poor performance in 1999. Singapore will be the main driver of growth in this segment initially, but demand there is expected to weaken from 2001, which will limit the segment’s overall growth during the forecast period.
Commercial vehicle recovery is concentrated mainly in light vehicle segments.
The sports utility vehicle (SUV) and utility segment, classed as commercial vehicles in this report, has seen the strongest growth rates in the region’s commercial vehicle sector. Its performance has been underpinned by new product development, particularly in utility vehicles, which has seen very strong growth in Indonesia and in the Philippines. SUV sales in Thailand have also increased, and the launch by Perodua of the Daihatsu Terios-based Kembara in Malaysia has also helped drive growth. This has mostly been consumer-based, with many utility vehicle designs now having a much stronger appeal to private motorists. The minibuses and van segment has perhaps suffered as a result of this rise. The light truck segment has also seen significant growth so far in the recovery cycle, though not to the same extent as the utility/SUV segment.
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