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.