'No turnaround in sight' for Asia automobile market
'No turnaround in sight' for Asia automobile market
TOKYO (Reuters): The severe slump in Southeast Asia's auto markets is likely to linger after dismal results for the first half of the year, analysts say, although fresh car financing schemes may offer some relief, albeit modest.
Industry data for the first half of 1998 painted a grim picture throughout the region: Vehicle sales in Thailand, Southeast Asia's largest market, fell 71.7 percent from the same period a year earlier to 70,277 units, while Malaysia was down 64 percent at 51,605 units and the Philippines slumped 50.6 percent to 20,036 units.
In Indonesia, one of the hardest-hit Asian economies, automobile production in the first half of the year plummeted 82.4 percent to 35,789 units.
"I don't think there's a turnaround in sight," said John Bonnell, a director of Automotive Resources Asia Ltd. in Bangkok.
He and other analysts predicted sales in Southeast Asia would remain sluggish for at least another two years.
The market slump has already forced some car plants in the region to close their doors.
Last Friday, Mazda Motor Corp. said one of its joint venture assembly plants in Thailand would shut down, after production had been halted in late May due to the poor economy.
A Mazda spokesman said output at the 23-year-old facility had slumped from 25,794 units in 1995 to 12,123 units in 1997 and to 2,160 units so far in 1998.
Mitsubishi Motors Corp., a major Japanese automaker burdened with heavy losses, said in March it would close one of its two car plants in Thailand as part of a restructuring plan. But Mazda, despite the plant closing, last month launched pickup truck production at a new, much bigger Thai facility built jointly with Ford Motor Co. The plant is scheduled to have production capacity of 135,000 units per year.
In defiance of the economic slump, Ford has successfully boosted its sales in Thailand and built up a dealer network, due in large part to what analysts said was an aggressive financing program.
"No matter how good your products are, in a climate like Thailand's right now you're not going to sell anything if you don't do more than just supply good products," said David Reuter, a Tokyo-based spokesman for Ford.
He said a Ford Credit Co. subsidiary in Thailand was developing unique leasing options, such as allowing farmers to make lump-sum payments at harvest time, while extending credit to dealers as it seeks to build up a network of 60 dealers by the end of the year.
He added that the company's approach in Thailand may be applied elsewhere in the economically troubled region.
"I'm sure it's going to spread because it's been very successful for us," he said.
Analysts expected other carmakers to follow Ford's lead. "I don't think any (carmaker) will be allowed to have the race to themselves in Thailand," said Ryuichiro Inoue, an analyst at Mitsubishi Research Institute.
Bonnell of Automobile Resources Asia agreed. "I think other companies like Toyota (Motor Corp.)...will probably step up their (financing) activities in the future," he said.
In line with such efforts, last Thursday Malaysia announced plans to raise the maximum credit on car purchases to 85 percent of the price from 70 percent, while extending the maximum repayment period to seven years from five.
But Bonnell said financing schemes were not a solution to the region's problems, and could even make them worse.
Noting that imprudent credit policies helped cause Southeast Asia's economic mess in the first place, he said of Malaysia's plan, "I think it would probably help the market, but I don't know if it would help Malaysia."
He also saw the carmakers' efforts as having only a limited benefit for the market.
"Financing may be able to push some extra vehicles that otherwise wouldn't be sold, but I don't think it's going to save the industry," he said.
"I think it all relates back to the economy," he added. "I think we're in for a long recovery period which will definitely impact sales of vehicles."