Seeking for bigger share in ASEAN car market

Seeking for bigger share in ASEAN car market

Imanuddin, The Jakarta Post, Pattaya, Thailand

Ford Motor Company, the Michigan-based car manufacturer,
recently invited a number of journalists from ASEAN countries to
Thailand and Vietnam as part of the company's ASEAN-wide
campaign. The Jakarta Post's Imanuddin took part in the week-long
trip.

Major thoroughfares in metropolis Jakarta, Singapore, Kuala
Lumpur, Bangkok and Manila are flooded with various brands, types
and models of automobiles.

From the popular Japanese names to the European idols and the
powerful newcomers from South Korea, you name it, all are
competing at high speed to win the hearts of the huge ASEAN
market.

And the Ford Motor Company, which besides manufacturing cars
under its own name also controls Volvo, Land Rover, Jaguar, Aston
Martin, Lincoln, Mercury and Mazda, has in the past few years
been making aggressive marketing efforts in major member
countries of ASEAN.

For some countries in the region, the presence of Ford --
which will celebrate its centennial anniversary next year -- is
perhaps relatively new.

But for Indonesians over the age of 50, Ford is not a new
brand, as its cars have been on the streets here since the late
1920s.

Thunderbird, Mustang and Cortina were among the Ford sedans
that arrived in Indonesia in the 1950s, 1970s and 1980s,
respectively.

Ford's presence here has, however, been on the decline since
the arrival of Japanese vehicles in the late 1960s. In a bid to
revitalizes its Indonesian operation, the company opened in
February two sales outlets, in South Jakarta and West Jakarta.

In the eyes of Ford executives, ASEAN is a prospective and
promising market.

"ASEAN represents the Association of Southeast Asian Nations,
comprising 10 nations. Though each of these countries is unique,
there are many commonalities to be drawn from them as a region,"
said John Parker, Ford's president for ASEAN operations.

"For the automotive industry, ASEAN offers huge potential.
Yet, compared to some of the more developed nations, ASEAN's huge
population represents a consumer market with a low vehicle
penetration of four vehicles per 100 people."

Looking at the bigger picture, the Asia-Pacific region
represents the largest market for the future. Approximately 8
percent, or three-quarters, of the world's automotive growth from
1999 to 2008 will be in Asia Pacific.

David Snyder, director of business development and
associations management for Mazda and Ford Asia Pacific, said
Asia, including ASEAN, was an important market for Ford as a
firm.

"No automaker can ignore the market in Asia. It will be a
great market real soon," Snyder said.

Ford has invested over US$1.3 billion in Asia in the five
years between 1995-2000. Currently, within ASEAN, Ford has a
manufacturing presence in four countries -- Thailand, Malaysia,
Vietnam and the Philippines. It also has sales and distribution
companies in those four markets, as well as in Singapore and
Indonesia, as well as finance and credit companies in multiple
locations.

John Parker said Ford was committed to long-term business,
investment and operation in ASEAN.

"Ford may be considered a late starter in comparison with its
Japanese counterparts, but I strongly believe that we have in
place the 'building blocks' for a solid foundation -- that we
have the products, innovation and technology, talent,
infrastructure, commitment, brand equities and 'can-do' spirit
that will make Ford a leader in the Asian auto industry," he
said.

An example would be Ford's success story in Thailand. It first
introduced the Ford Ranger, a 4x4 pickup, in 1998 and succeeded
in gaining a 10.5 percent market share in just three years. The
international research institute JD Powers named the Ford Ranger
the best pickup in two consecutive years -- 2001 and 2000.

Yet, Ford is also realistic about its presence in ASEAN,
especially its recent presence in Indonesia.

"There is a market of 300,000 vehicles in Indonesia ... it's a
big market indeed. But we are aware that we cannot become a
market leader in such a short period of time," said Scott
McCormack, brand director of PT Ford Indonesia.

But to Ford, ASEAN will only be competitive when it is viewed
as one market, with 550 million people and over 1 million in
vehicle sales annually.

"Auto manufacturers recognize that as 10 separate markets, the
ASEAN markets are too small to be of significance. Together, they
are a formidable market," John Parker said.

A fragmented ASEAN may be a small market in terms of size, but
an integrated ASEAN would be the eighth largest auto market with
1 million in car sales. And with continued growth, it could
become the fourth largest auto market by 2005 with 2.2 million in
auto sales.

Ford's confidence about penetrating the ASEAN market is also
due to the fact that the ASEAN Free Trade Area (AFTA) comes into
effect in six founding members of the association -- Indonesia,
Singapore, Malaysia, the Philippines, Thailand and Brunei -- on
Jan. 1, 2003.

In line with AFTA, all but a few import tariffs will be
reduced to between zero percent and 5 percent.

Consequently, for example, cars imported from these countries
will be able to be sold at cheaper prices in Indonesia, while
Indonesian-made cars can be sold cheaper overseas.

And Ford believes that AFTA will allow manufacturers to unlock
regional volumes, as there is a lot of unused capacity in the
region with many car factories operating at below 60 percent of
capacity utilization. This 60 percent utilization is the bare
minimum required to keep a plant open and profitable.

AFTA could act to boost regional volumes, which would allow
vehicle manufacturers to fill up today's unused capacity.

The important thing about AFTA is that it creates one market
of 520 million people, said John Parker.

"Because of AFTA, vehicle manufacturers have market access
which in turn drives investment, job creation, small and medium-
scale business development, and effective and real technology
transfer," he said.

For all these manufacturers, AFTA also allows coimplementation
and product specialization.

"In terms of economies of scale, AFTA brings reduced
complexity, reduced costs and increased quality. Rather than
building the same product in multiple plants in the region, we
can assign one product to one plant and allow that plant to
specialize. Indeed, that is Ford's strategy in ASEAN, and we
believe it is a winning strategy.

"We also believe AFTA is a 'Win Win Win' formula. It's a win
for governments because it allows investment by the auto
industry, which is large scale and involves meaningful technology
transfer and jobs. It's a win for car companies because it allows
us to fully utilize our plants, and a win for parts suppliers
because it opens up export markets to them. And it's a win for
customers because they will have greater access to world-class
vehicles at competitive or even cheaper prices," he said.

As an example, he said that in 2001 Ford built pickup trucks
and passenger cars in both Thailand and the Philippines. This
resulted in duplication of vehicle assembly, duplication of
suppliers and no resource sharing, which was inefficient and led
to higher costs.

With the help of AICO, or the ASEAN Industrial Cooperation
Scheme, Ford decided to concentrate production by moving pickup
truck manufacturing to Thailand only, and passenger cars to the
Philippines only, he said.