'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."