Asian car overcapacity seems strong likelihood
By Neil McDonald
ASIA is in danger of having a huge excess capacity of cars within a few years, according to a survey on the worldwide automotive industry.
The survey warns that carmakers must find new and innovative methods to realize profits in the region to offset an over capacity situation.
The survey says that with overcapacity draining company profits, a concentration on improving the efficiency of distribution, sales and servicing could help the bottom line.
According to the survey, The Automotive Industry: Strategies and Priorities in a Global Environment, 40 percent of the world's excess capacity will reside in Asia by 2001.
The report echoed the chairman of Ford, Alex Trotman's, concern recently about excess vehicle-making capacity worldwide. The report was put together by Deloitte & Touche Consulting Group, part of the Deloitte Touche Tohmatsu International empire, and released in May.
In it, it says recent figures show that by 2001, the global automotive industry will have the ability to assemble more than 210,000 vehicles a day, as opposed to 178,000 today.
In Asia, in terms of both growth and size, total automobile sales in the region, including Japan, are forecast to reach between 18.5 million and 19 million by 2005.
Not surprisingly, Southeast Asia is the force behind these figures, with Thailand, Indonesia and the Philippines driving most of the region's growth.
For many world carmakers, Asia was quite often thought of as an unlimited "frontier" market for carmakers, it says.
"However, the reality appears to be quite different," it says.
"An important part of the region, Southeast Asia, in fact offers a rather limited market with numerous, perhaps too many players vying for competitive advantage.
"Faced, then, with a dramatic rise in global competition, automakers must find new and innovative methods to realize profits.
"One area which all carmakers are considering is the selling and distribution process."
The report says efforts to reengineer sales and distribution activities in the automotive sector are long overdue.
"Sales and distribution represent significant costs to automakers, costs which, until recently, have generally been neglected by corporate budget trimmers," it says.
"In today's highly competitive environment, losing pace with leading innovators can mean significant losses in profits and market share.
"It is therefore critical to gain a thorough understanding of the changes taking place around selling and distribution strategies in the industry."