Overall, Asia's developing automotive markets saw growth of 4% last year - to notch up a new record for unit sales against a backdrop of weakening global and region-wide GDP growth. Demand in the countries surveyed exceeded six million units for the first time ever, driven by continuing strong consumer demand in many markets. Last year's sales growth was much lower than the double-digit rates of the previous two years, when the region was recovering from the 1997 financial meltdown.

But a closer look at the 2001 national markets reveals a very mixed performance. The region's largest market, China, performed exceptionally well. According to data released by the industry (which has to be viewed with a degree of caution), vehicle demand grew by 14% in 2001 in the world's most populous nation - with passenger car sales leading the charge with a jump of almost 18%. Malaysia - the region's fourth-largest vehicle market last year, also put in a robust performance with an increase of 15.5% which brought the market close to its pre-crisis highs. Improved availability of new models from Proton helped to drive the market forward.  The worst performers were India, Taiwan and the Philippines, which saw new vehicle demand fall by around 9% last year. Elsewhere, the trend either way was more muted.

Reducing pressure on the economies in the region last year was the falling price of oil, which helped to ease concerns over cost and price inflation. But overall,


"the economic climate continued to deteriorate throughout most of the region"
the economic climate continued to deteriorate throughout most of the region last year, and there few signs that conditions will improve in the next few months. Japan remains a major source of uncertainty, definitely on the export demand side but also in respect of currency valuations. Most regional currencies have shrugged off the recent yen devaluation, which should help the Japanese vehicle manufacturers and thus demand in the region, as long as this divergence lasts. But there is some concern that this may not last, and that the currencies that are currently pegged may be forced to devalue.

Key to a resumption of stronger growth in Asia will be a revival in the large export markets in the West, particularly in the US and Europe. The other catalyst for the resumption of higher GDP growth in the region will be a pick up in corporate investment, but this is expected to be selective at best in the short-term. Bank restructuring following the fall-out of the region's markets has been disappointing, and progress in this area will be crucial to ensure that consumer demand can continue to grow and that companies can fully harness opportunities during the next recovery cycle. Government and private debt remains a major impediment for a rapid recovery in regional demand, and political instability also has a major influence on consumer confidence.

With these factors in mind, I expect that vehicle demand in the region will grow by around 1.4% in 2002, and that growth will not accelerate significantly from 2003. The performance of the individual markets will vary significantly, however. China, South Korea, India and Taiwan will be the main sources of growth in regional vehicle sales this year, the latter two having been the worst performers in 2001. The Philippines, too, should bounce off its lows this year. With more markets contributing to growth in 2003, regional vehicle demand is likely to rise 4.4% next year.

Asia: vehicle sales and forecasts by country 1997-01

 

1997

1998

1999

2000

2001

China

1,579,693

1,633,575

1,845,922

2,125,531

2,362,791

South Korea

1,512,935

773,036

1,273,029

1,430,460

1,451,450

ASEAN

1,343,687

493,116

737,539

1,093,852

1,167,363

India

728,665

614,858

826,884

849,680

817,641

Taiwan

473,129

474,734

419,163

410,308

347,433

Others *

72,000

48,000

52,000

64,000

67,000

Total

5,710,109

4,037,319

5,154,537

5,973,831

6,213,678

Asia: vehicle sales and forecasts by country 2002-05

 

2002

2003

2004

2005

China

2,413,000

2,427,000

2,443,000

2,467,000

South Korea

1,557,000

1,615,000

1,633,000

1,635,000

ASEAN

1,145,000

1,234,000

1,323,000

1,444,000

India

853,000

913,000

944,000

966,000

Taiwan

381,000

435,000

470,000

493,000

Others *

52,000

60,000

67,000

72,000

Total

6,401,000

6,684,000

6,880,000

7,077,000

* includes estimates for Pakistan, Hong Kong, Brunei and smaller emerging markets.

Sources: Industry sources; just-auto.com forecasts.

China has continued to attract the lion's share of the region's foreign investment, and this has helped it maintain relatively high GDP growth (in the 7-8% range) over a long period. Its transforming economy, the broader availability of credit, falling car prices resulting from lower taxation/tariffs and greater competition continues to attract new private buyers into the market. Its entry into the WTO at the end of last year is expected to be positive for the vehicle market in the short-term, as tariffs continue to fall. The country's improved access to export markets in general will help maintain momentum in the economy. But most observers are keeping a wary eye on the growing unemployment that is resulting from the ongoing economic restructuring, which could become a source of social unrest, and any signs of a slowdown in inward investment. I'm cautiously optimistic that vehicle demand will continue to increase in the short-term, though much flatter growth is expected in the medium term.

South Korea's consumers have also shrugged off the growing weakness overseas. Some corporate restructuring has taken place, but the effects of lay-offs have been in part offset by growth in the small business sector. Unemployment has clearly not risen as sharply as many had feared - at 3.7% in January - despite the drop in GDP growth from the double-digit rate of 2000 to around 3% in 2001. The export sector remains very competitive, particularly for cars and consumer electronics. There are increasingly positive economic signs coming through from South Korea, and GDP growth is broadly expected to be around 4% in 2002. New products have been the main source of volume growth in the vehicle market, with long waiting lists for the most popular models. Hyundai-Kia group has benefited significantly from Daewoo Motor's troubles, and is expected to remain the main beneficiary of the tax incentives that the government introduced at the end of last year.

Automotive tax incentives introduced in India last March failed to stimulate vehicle market growth last year. Weakening economic conditions, a drifting currency and inflationary pressures evidently prevailed on the mood of buyers. GDP growth is expected to be over 5% in the current fiscal year, which is clearly not enough to drive the economy and the vehicle market forward. The industrial sector in particular was weak, along with the hi-tech/software sector. The correlation between the vehicle market and GDP growth is extremely close in this country, but a moderate improvement this year is expected. Some of last year's negative economic influences have dissipated, and key segments of the economy should see some recovery this year. Overall, the domestic vehicle market should show some recovery, particularly in the medium and heavy truck sector and cars/utility vehicles.

Economic growth in the ASEAN is expected to be subdued this year, with GDP growth forecasts generally ranging between 2-3% for the major economies. Most of the growth is expected to come in the second half of the year. This rate of growth is clearly not enough to drive the economies forward, and reduce poverty and unemployment. The export sector will likely remain weak until the second half of the year, and overall full-year performance for this sector is expected to be flat for the region. After the strong bounce-back in the last two years, we expect a moderate decline in Malaysia, Indonesia and Singapore. The Philippines is expected to recover this year from its lows, and Thailand's recovery is also forecast to continue - albeit at a moderate pace. A broader recovery is expected to take hold from 2003, as global economic growth picks up.

Asia: vehicles sales and forecasts by type and country 1997-01

 

1997

1998

1999

2000

2001

China

         

Pass. cars

506,222

522,112

576,380

640,171

754,003

Com. vehicles

1,073,471

1,111,463

1,269,542

1,432,788

1,608,788

Total China

1,579,693

1,633,575

1,845,922

2,072,959

2,362,791

S. Korea

         

Pass. cars

1151,287

575,310

910,725

1,057,620

1,065,161

Com. vehicles

361,648

197,726

362,304

372,840

386,289

Total S. Korea

1,512,935

773,036

1,273,029

1,430,460

1,451,450

India

         

Pass. cars

396,234

375,880

555,639

583,012

557,746

Com. vehicles

332,431

238,978

271,245

266,668

259,895

Total India

728,665

614,858

826,884

849,680

817,641

Taiwan

         

Pass. Cars

358,902

360,388

306,771

299,168

255,798

Com. Vehicles

114,227

114,346

112,392

111,140

91,635

Total Taiwan

473,129

474,734

419,163

410,308

347,433

ASEAN

         

Indonesia

392,179

59,216

96,767

309,514

299,560

Malaysia

405,087

163,851

288,547

343,173

396,381

Philippines

144,968

79,811

74,401

84,132

76,670

Singapore

34,766

37,520

49,512

78,375

75,200

Thailand

357,792

144,082

218,342

262,109

297,052

Vietnam

8,895

8,636

9,970

16,549

22,500

Total ASEAN

1,343,687

493,116

737,539

1,093,852

1,167,363

Asia: vehicles sales and forecasts by type and country 2002-05

 

2002

2003

2004

2005

China

       

Pass. cars

798,000

824,000

808,000

815,000

Com. vehicles

1,615,000

1,603,000

1,635,000

1,652,000

Total China

2,413,000

2,427,000

2,443,000

2,467,000

S. Korea

       

Pass. cars

1,162,000

1,213,000

1,223,000

1,240,000

Com. vehicles

395,000

402,000

410,000

395,000

Total S. Korea

1,557,000

1,615,000

1,633,000

1,635,000

India

       

Pass. cars

581,000

615,000

632,000

641,000

Com. vehicles

272,000

298,000

312,000

325,000

Total India

853,000

913,000

944,000

966,000

Taiwan

       

Pass. Cars

282,000

325,000

348,000

365,000

Com. Vehicles

99,000

110,000

122,000

128,000

Total Taiwan

381,000

435,000

470,000

493,000

ASEAN

       

Indonesia

275,000

310,000

340,000

390,000

Malaysia

378,000

392,000

415,000

430,000

Philippines

92,000

110,000

119,000

131,000

Singapore

62,000

55,000

52,000

56,000

Thailand

314,000

342,000

371,000

410,000

Vietnam

24,000

25,000

26,000

27,000

Total ASEAN

1,145,000

1,234,000

1,323,000

1,444,000

Sources: Industry sources; just-auto.com forecasts.