Race for Asia auto markets heats up in the 21th century

Race for Asia auto markets heats up in the 21th century

TOKYO (Reuters): It looks set to be the auto race of the 21st century. It's the race for Asian market share.

The world's automakers are all jockeying for position in Asia, long dominated by the Japanese but now squarely in the sights of the big U.S. automakers and a few of their more ambitious European rivals.

Hugging the limelight is General Motors, taking the region's industry by storm with a raft of alliances, although Ford Motor Co has built a strong base in Asia through its control of Mazda Motor Corp, a once-ailing mid-sized Japanese automaker it has steadily nursed back to health.

From Europe, DaimlerChrysler is hungry for an acquisition or alliance in the region, while France's Renault SA, with its takeover of Japan's Nissan Motor Co, has also made itself a contender.

And some, like Germany's Volkswagen which has two joint ventures in China and a dominant market share there, appear to be putting most of their efforts in one country.

Despite the challenge, analysts say top Japanese automakers like Toyota Motor Corp and Honda Motor Co are well-equipped for the coming battle, especially in Southeast Asia, where they have long experience.

"Japanese makers have built up a wealth of knowledge in making profits out of still very small, very protected markets," said Minako Mori, analyst at the Sakura Institute of Research. "Western makers are going into ASEAN with a large handicap." Toyota dominates the Thai and Indonesia markets, while Honda is seen as one of Asia's strongest passenger carmakers, able to draw on deep brand loyalty built up by its motorcycle business.

But pressure from Western makers is beginning to be felt.

GM and Ford, the world's two biggest automakers, are each aiming to capture a 10 percent chunk of the Asian market. GM wants to do that in five years, doubling its current share, while Ford, which only has one percent of the Asian market now, has set a target date of 2007.

With Asia housing some of the world's most populous nations that have barely begun to get motorized, the race promises riches for those that get their strategies right.

Asia's car and light truck market is likely to grow to around 15 million vehicles in 2004 and 19 million in 2009, from 11 million in 1999, according to Standard & Poor's DRI.

And getting the strategy right means making the best use of Asian partners.

"Traditional Big Three cars are totally inappropriate for Asian conditions," says Standard & Poor's DRI analyst Ashvin Chotai. "How do you get around it? Japanese-based products."

Taking strategic stakes in smaller Japanese automakers, GM has managed to acquire Asian design and small-car know-how, as well as distribution channels, it needs to succeed in Asia.

It owns 20 percent of Subaru maker Fuji Heavy Industries, boosting its four-wheel drive technology, and has 49 percent of truckmaker Isuzu Motors, which is strong in Thailand. It also holds 10 percent of minivehicle maker Suzuki Motor, which in a joint venture with the Indian government dominates India's passenger car market.

"Both GM and Ford are moving aggressively, but it might be GM's strategy of making the best of its partners' strength that works the fastest," says Toyota Managing Director Koji Hasegawa.

The first product of GM-Suzuki cooperation is YGM-1, an "Asian strategy" car unveiled in October to enthusiastic reviews. A small, sporty passenger car to be marketed as a Chevrolet, it goes into production next year.

GM is also seen as most-favored bidder for South Korea's Daewoo Motor, now up for auction, and has a leg up on Ford in China, where it has much greater production capacity.

As some analysts see it, GM and family have left rival Ford in the dust, but others are less certain, predicting that Ford's successful restructuring of Mazda will serve it well in Asia.

They also point to Ford's plants in Taiwan, Malaysia, the Philippines and Vietnam, where GM has none, and praise its aggressive efforts at building up dealer and finance services.

Ford has also been busy developing its cars for Asia, creating the Ford Ikon for India -- a stretched version of the Fiesta with doors that open wider to facilitate entry for women wearing saris and more headroom for men wearing turbans.

And in South Korea, there is speculation that even if Ford, also likely to bid for Daewoo, loses out to GM, it may form some sort of tie-up with Hyundai Motor.

And the competition will not stop with GM and Ford. Although considered a laggard in Asia, DaimlerChrysler, also cited as a possible bidder for Daewoo, is looking at potential Asian partners with some reports signaling a move early this year.