Joint study by the VDA and Management Engineers on automotive opportunities and challenges in south-east Asia
ASEAN: the undiscovered automotive region
Frankfurt am Main, 14 August 2009. ASEAN, the association of ten south-east Asian states with over 570 million inhabitants, is increasing in strategic importance for the international automotive industry. This is particularly true in times when the industry is looking for new future markets worldwide. Today in the ASEAN region already over two million vehicles are produced and sold. It is expected that after a short breather the ASEAN automotive market will also demonstrate high rates of growth in the coming years. This is the conclusion of the German Association of the Automotive Industry (VDA) and the consulting firm Management Engineers in a joint study (entitled "Perspektiven für die Automobilindustrie in den ASEAN-Staaten," meaning "Prospects for the Automotive Industry in the ASEAN States"), which was presented in Frankfurt.
According to the study, there are three main reasons suggesting that sales figures will continue to climb: a large gap to be closed, rapid population growth and dynamic economic development. For example, Vietnam has only seven vehicles per 1,000 inhabitants, Indonesia has 49, and Thailand as many as 146. By comparison, in all western industrialized countries there are more than 500 vehicles per 1,000 inhabitants. Today 60 million more people live in the region than did in the year 2000 - and the number is still rising. Then there is the fact that in comparison to other traditional sales markets the potential consumers are especially young and interested in improving their circumstances. Furthermore, once it has overcome the current global economic slump, the ASEAN region is expected to quickly regain its previous dynamism - with growth rates of six per cent and more.
However, ASEAN is not a homogeneous economic area. There are serious differences in prosperity and growth, which are also reflected on the streets: light commercial vehicles dominate in Thailand, while in Indonesia and Malaysia is it the classical passenger car. Vietnam, the "stronghold of the two-wheelers," promises especially interesting prospects in the lowest price segment; Singapore and Brunei are showing a keen demand for premium vehicles.
"For OEMs and suppliers this therefore means that they will differentiate their ASEAN sales strategy according to the various requirements in the different areas and in line with new developments," said Helmut Surges, partner and director at Management Engineers. He sees a promising trend in the area of "eco cars": "The demand is for low-consumption vehicles at lower purchase prices, whose sales in some countries are encouraged by state-run promotional programs. This results in specific opportunities for German automotive manufacturers and suppliers who can score points on the market with an intelligent environmental technology."
The German and European automotive industries need free trade with the region, and/or agreements with the most important markets. At present, producers from the EU must cope with paying import duties of up to 100 per cent and also accept other non-tariff trade barriers. Furthermore, they are at a clear disadvantage compared to Japan: an agreement allows the Japanese automotive industry to import its vehicles into the ASEAN region at significantly lower import tariffs than those the European and American competitors have to pay. So the Japanese market share in Thailand and Indonesia is over 80 per cent.
"This competitive disadvantage should be reduced as fast as possible, so that preparations can be made for the long-term success of the German automotive industry in the ASEA region. We would therefore very much welcome the continuation of the negotiations on a free trade agreement - whose last round came to a standstill - and with individual ASEAN countries. This could not only boost Germany's export capability, but also facilitate more broad-ranging activities locally," stressed Dr. Kunibert Schmidt, Managing Director of the VDA.
As a production location ASEAN would gain extra benefit from such foreign investments. A large challenge for domestic OEMs and suppliers is fulfilling the quality requirements. Improvements can be expected here due to state promotional programs and cooperative projects with foreign companies.
Against this backdrop, the study concludes, German manufacturers and suppliers should think carefully about whether they want to take part in the dynamic growth in the ASEAN automotive region - and with local presence. Many of the member states are "about to become modern industrialized countries," and at the same time there is a huge gap to be closed. This combination boosts the markets even in difficult times.
