Indonesia, the world's fastest-growing car market

By Russell Williamson

INDONESIA will be fastest-growing car market in the world over the next five years.

According to a report by the Economist Intelligence Unit, Indonesia's new-car sales are expected to grow at an annual compound rate of 18.4 percent.

The rise in its car market is being propelled by strong economic growth and the increasing number of models and makes available.

This growth rate is more than 4 percent higher than the next fastest-growing market, Vietnam.

Asian countries make up five of the top 10 fastest growth markets with India and China expected to make the greatest gains in volume terms.

Both countries are expected to have markets in excess of one million vehicles a year by 2005.

Together with the emerging markets of Asia, increasing sales in countries in South America and Eastern Europe are anticipated to push global sales from 35.1 million vehicles last year to just under 40 million a year by 2005.

In contrast to the high growth levels in developing markets, sales in North America will grow by just 0.6 percent a year to 2005 while European sales will remain steady.

In Japan, new-car sales are actually expected to fall over the next seven years by about 0.4 percent.

However, despite the falling sales in the Japanese market, Japanese carmakers are expected to make the biggest gains overseas.

With the Japanese manufacturers already holding the lion's share of the market in Asia, the fortunes of Toyota, Nissan, Honda and Mitsubishi are set to rise substantially.

In Thailand, where Japanese carmakers already have about 90 percent of the market, the recent introduction of low cost "Asia cars" by Honda and Toyota has resulted in the two companies taking more than 30 percent of the passenger car market with just the City and Soluna.

Toyota took nearly 25,000 orders in the first three days after the company launched its Soluna in January and expects to sell about 40,000 cars there this year.

The 1.5-liter four-door sedan is due to go on sale here by the middle of next year.

Likewise, Honda, riding on the back of its small 1.3-liter City launched last April in Thailand, increased its share of the passenger car market from 23 percent in 1995 to 44 percent last year.

The Japanese carmakers growth, however, will not be limited to Asia with Japan's penetration into the European and North American markets also expected to increase.

In Europe, Japan's new-car sales are predicted to grow by 30 percent as restrictions on Japanese exports to the European Union are phased out by 1999.

Last year, Japanese manufacturers sold 1.4 million cars in western Europe or an 11 percent share but this is expected to rise to 1.7 million or 13.8 percent share by 2000.

This will be further aided by an increase in Japanese transplant production in Europe, which will increase from 760,000 cars to 1.1 million by 2000.

In the United States, a more moderate growth is expected with Japanese-badged cars increasing their market share from 30 percent last year to just over 34 percent by 2005.

As a result of the increased sales worldwide, Japan's big four manufacturers -- Toyota, Nissan, Honda and Mitsubishi -- will all remain in the top 10 car producers, with each increasing its production levels by 2005.

Despite the onslaught of the South Korean carmakers on the world stage in recent years, none are expected to become top 10 manufacturers in the next five years.

Hyundai, Daewoo and Kia all claim they will be in the top 10 car producers by 2000, but the report says this would be highly unlikely, even by 2005.

Although the South Koreans may have a combined capacity of 4.2 million cars a year by 2000, utilization is only expected to reach 64 percent, with actual car production forecast to reach just under 2.7 million.

With the South Korean domestic market only expected to take 1.3 million cars a year by 2000, exports will remain the focus for expansion.

But with global over-capacity remaining endemic and likely to get worse as emerging markets in Asia and South America establish their own manufacturing operations, the opportunities for exports of South Korean cars is expected to be limited.

The report acknowledges the South Koreans' greater influence on world markets but says it is only expected to result in the existing top 10 manufacturers losing 5 percent of the total production share.

By 2005, the top 10 will account for 75 percent of the world's production, compared with 80 percent in 1996.

General Motors is expected to remain the largest carmaker with about 12 percent of the world car output, with Ford/Mazda in second place.