AFTA opens door for auto assemblers, dealers<\/p>\n
Eileen Ng, Agence France-Presse, Kuala Lumpur<\/p>\n
Foreign automakers have reason to smile about the opening of
\nmarkets in Southeast Asia under a regional free trade plan but
\nlocal assemblers and distributors are sporting deep frowns.<\/p>\n
In anticipation of the Association of Southeast Asian Nations
\n(ASEAN) Free Trade Area (AFTA), foreign manufacturers have begun
\nphasing out franchises in order to cut out middlemen and boost
\ntheir direct presence in the region.<\/p>\n
The shake-up in the region's auto industry, especially in
\nMalaysia, has spread gloom amongst local firms which have for
\nyears relied heavily on distributing rights for their survival.<\/p>\n
\"We are doomed,\" lamented a senior official at a car
\ndistribution firm in Kuala Lumpur.<\/p>\n
\"AFTA is bad news for us. Foreign manufacturers have raised
\ntheir investment in the region ahead of AFTA to establish their
\npresence and are taking back their franchises. Many of us will go
\nbust.\"<\/p>\n
This trend is not unique to the region and is partly due to
\nthe consolidation of the global car industry, which is forcing
\nmanufacturers to improve margins, said the official, who declined
\nto be named.<\/p>\n
Malaysia is among the top four auto markets in ASEAN, along
\nwith Thailand, the Philippines and Indonesia.<\/p>\n
Tariffs of between 10 and 40 percent for cars and components
\nwill be slashed to below five percent under AFTA by January,
\nexcept in Malaysia which has delayed its move until 2005 to give
\nits national car industry more time to adjust.<\/p>\n
Japan's number two carmaker Honda Motor Co. started the ball
\nrolling in July 2001 when it withdrew the exclusive rights for
\nlocal firm Oriental Holdings to distribute cars in Malaysia,
\nSingapore and Brunei.<\/p>\n
Honda took up a controlling 51 percent stake in a local joint
\nventure and last week unveiled plans to invest 374 million
\nringgit (US$98 million) in its Malaysian manufacturing operations
\nby 2005.<\/p>\n
Oriental was quick to sign on Hyundai, under which it would
\ndistribute and make components for South Korea's largest
\nautomaker.<\/p>\n
Germany automaker Mercedez-Benz will also take over the
\ndistribution rights for its cars in January from Cycle and
\nCarriage Bintang, which plans to switch to Peugeot cars.<\/p>\n
Europe's largest automaker Volkswagen AG will retain a local
\ndistributor but on Wednesday it split with Auto Dunia and signed
\non Malaysian national car distributor Edaran Otomobil Nasional
\n(EON) to take over the franchise for Audi and Volkswagen cars
\nfrom next year.<\/p>\n
Toyota, Nissan and BMW have also retained local middlemen,
\nanalysts said.<\/p>\n
But BMW is already in negotiations to withdraw distribution
\nrights from Tractors Malaysia Bhd. while the Nissan franchise
\nunder Tan Chong group appears vulnerable, they said.<\/p>\n
Local firm UMW's rights to assemble and distribute Toyota
\nvehicles appear more stable as the Japanese auto giant owns 49
\npercent of UMW Toyota.<\/p>\n
South Korean carmakers are among the handful that have not
\nseized control of distribution rights, although analysts said
\nthey are slowly becoming a threat to their Japanese rivals.<\/p>\n
Kia Motors has tied up with Malaysia's Naza group and said it
\nwould invest 350 million ringgit in a manufacturing plant in
\nnorthern Kedah state, with an initial annual capacity of 20,000
\nvehicles by 2004.<\/p>\n
Production will be increased to 60,000 vehicles in the long-
\nterm, of which some 60 percent will be for export.<\/p>\n
Analysts said Malaysia was also losing out to Thailand, which
\nhas emerged as a regional manufacturing base ahead of AFTA due to
\nits lower costs and liberal investment rules.<\/p>\n
Thailand allows foreign manufacturers to hold 100 percent
\nownership, compared to Malaysia which has set a 51 percent
\nceiling and stipulates the involvement of a local partner, one
\nindustry observer said.<\/p>\n
Toyota and Isuzu have begun moving their pick-up truck
\nproduction base to Thailand, and Germany's BMW has pledged to
\ninvest 14.3 million dollars to expand its Thai plant to cater for
\nexports.<\/p>\n
Thailand led ASEAN's auto recovery last year, producing
\n459,000 vehicles or 36 percent of the region's total, according
\nto market researcher Automotive Resources Asia.<\/p>\n
It forecast production by Thailand, Malaysia, Indonesia and
\nthe Philippines would grow to two million vehicles by 2006, up
\nfrom 1.28 million last year.<\/p>\n
Thailand is expected to lead other ASEAN producers by
\nassembling 940,000 vehicles, or 48 percent of regional
\nproduction, in 2006.<\/p>",
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