Bumpy ride seen for Southeast Asian vehicle market

Bumpy ride seen for Southeast Asian vehicle market

SINGAPORE (AFP): Southeast Asia's vehicle market is in for a
bumpy ride in the next five years due to the region's volatility,
and only players with strong global partners will survive the
race, analysts said.

Top global bank ING Barings warned economic and political
uncertainties in the region's four biggest markets are likely to
delay the time frame for the achievement of industry targets for
vehicle volumes.

Vehicle manufacturers and industry experts have forecast an
average compound annual growth rate (CAGR) of 13.8 percent for
the region's vehicle market until 2005. Over the same period,
total vehicle volumes would grow to 1.6 million.

However, ING Barings said that "although the strong vehicle
growth rates projected ... are achievable, the time frame will
most likely be stretched to beyond 2005, possibly even to 2010."

It cited political and economic uncertainties in the region
and concerns over Malaysia's decision to delay by two years the
liberalization of its auto industry under the Association of
Southeast Asian Nations Free Trade Area, or AFTA.

"Economically across the region, we are seeing slowing
domestic consumption, more rapidly in the Philippines and
Thailand with early signs of peaking demand in Indonesia and
Malaysia," the bank said in a report.

The four are the biggest auto markets in ASEAN, which has
committed under AFTA to tear down tariff barriers to between zero
and five percent by 2003.

Malaysia has said it will delay tariff reduction in its
automobile industry to 2005 to give a breather for its Proton
national car.

ASEAN, which also groups Brunei, Cambodia, Laos, Myanmar,
Singapore and Vietnam, last year approved a protocol allowing
countries to temporarily opt out in sectors where they feel they
need more time to prepare for full competition.

Combined new vehicle sales in ASEAN's four largest markets
climbed 53 percent in the first 11 months of 2000, but falling
sales in the second half dampened the rise, marketing strategy
firm Automotive Resources Asia (ARA) said in a report last month.

"Declining confidence in regional economies caused new vehicle
sales in the second half of 2000 to be lower than the first half
of the year," said ARA executive director John Bonnell.

Autopolis, an automotive consulting firm, said in its latest
quarterly review Asia's car markets face a seven percent slump
this year, reversing two years of growth as they fall victim to a
US slowdown and weakening regional economies.

Southeast Asian region car sales would fall 8.9 percent, it
said.

It blamed the downturn on "falling currencies, lower stock
prices and declining exports, as well as political uncertainties
in many places."

Indonesia, ASEAN's largest country, remains mired in political
turmoil and Thailand is struggling to form a new government after
emerging from parliamentary elections marred by fraud
allegations.

New Philippine President Gloria Arroyo, swept to power by a
military-backed civilian uprising that deposed President Joseph
Estrada last month, is still consolidating power amid a yawning
budget deficit and potential political threats.

"Given the expected volatility in the region, the growth
pattern for ASEAN's vehicle market is likely to be a choppy one
rather than a linear growth pattern.

"We must stress that despite the expected bumpy ride, we think
the region is still attractive for long-term automotive
manufacturers keen on capitalizing on the strong growth
prospects," ING Barings said.

With the absence of an indigenous vehicle manufacturer, ASEAN
winners will be "players with a strong global presence and the
staying power to withstand the region's volatility," ING Barings
said.

Japanese car-maker Toyota would be the region's biggest
success due to its strong global presence, established brand name
and a focused strategy, it said.

But Malaysia's Proton needs a strong global ally to ensure its
chances of survival, it added.