January 2013 management briefing: World markets (2)
By Tony Pugliese | 28 January 2013
Vehicle sales growth of 34% in the ASEAN region last year helped to drive the global sales total up
What does 2013 have in store for the world's auto industry? There will always be variations in how individual firms perform, but the whole industry will be watching developments in major markets very closely. Just how far they grow or contract has major implications for everyone - for volumes, for margins and for bottom lines. We review prospects for demand in the major vehicle markets. This instalment reviews the latest developments in the major markets of south-east Asia.
ASEAN sales up 34% in 2012 as Thailand and Indonesia drive growth
New vehicle sales in the ASEAN region’s six largest markets jumped by almost 69% to 990,421 units in the fourth quarter of 2012, from 586,544 units a year earlier, as the main economies in the region continued to enjoy strong domestic growth.
Fourth-quarter regional growth was helped significantly by depressed year-earlier sales in Thailand, when the automotive industry was brought to a standstill by floods. For other major markets, the strong fourth-quarter performance was a continuation of an ongoing growth trend driven by rising incomes and affordability.
Full-year regional sales increased by 33.9% to a new record high of 3,476,148 units, compared with the previous high of 2,596,633 units in 2011. Sales growth was much stronger in the second half of the year, as inventories across the region improved after the disruption from the Thai floods.
The main drivers of regional growth last year were Thailand and Indonesia – with both markets posting new record highs of over 1 million units for the first time.
Thailand’s vehicle market in particular enjoyed extraordinarily strong growth last year, driven by government incentives and by pent-up demand from the previous year. Sales increased by almost 81% to 1,436,335 units.
Market growth in Indonesia was more organic, driven by an economy that continues to enjoy strong growth as a result of rising domestic consumption and investment. Low interest rates have increased demand for credit, which has underpinned growth in consumer demand in recent years.
Efforts to prevent the credit market from overheating such as higher minimum down-payments on car and property loans have had a limited impact so far. Full-year vehicle sales rose by 25% to a new record of 1,116,230 units.
After a weak start to the year, due mainly to tighter lending requirements and new registration procedures, the Malaysian vehicle grew to a new record high of 627,753 units in 2012.
Similarly, the Philippine vehicle market enjoyed growth of over 10% to an estimated 179,500 units, driven by strong domestic economic growth amid rising incomes and credit growth.
The smallest markets in the group, Vietnam and Singapore, reported lower volumes last year. Vietnam’s economy continued to be held back by high inflation and correspondingly high interest rates. Sales fell by close to 25% to 82,416 units. The vehicle market on the island-nation of Singapore is heavily regulated, with a quota system in place designed to promote public transport.
Thailand’s new vehicle market rebounded strongly in 2012, with volumes jumping by 80% to a new record of 1,430,000 units compared with 794,091 units in 2011.
The market has been driven by a combination of strong pent-up demand following severe disruption to supply in the fourth quarter of 2011; incentives for first-time buyers; and economic stimulus to assist in post-flood rebuilding.
Sales in the fourth quarter of 2012 jumped by over 250% to 437,618 units, from a depressed 123,121 units a year earlier. Sales were also abnormally high in the fourth quarter, with buyers rushing into showrooms ahead of the expiry of the government’s first-time buyer incentives at the end of December.
The country’s economy is estimated to have grown by 5.9% in 2012, after a slow start to the year when a significant part of the country’s production capacity still had to be restored. This compares with growth of just 0.1% in 2011, with the economy collapsing in the fourth-quarter of that year.
The Thai central bank expects 2013 economic growth at around 4.9%, with the recent introduction of minimum wages expected to continue to help drive domestic consumption. The bank expects private investment to rise by over 12% and exports by over 9% this year.
After an abnormally strong year in 2012, the vehicle market is expected to decline this year, with much of the pent up demand already released and with the expiry of government incentives. Toyota expects total volumes to drop by 16%, but the decline could be more significant given the abnormally high volumes in 2012.
New vehicle sales in Indonesia increased by 25% to a new record of 1,116,230 units in 2012, from 894,164 units in the previous year, according to data released by industry association Gaikindo.
The country’s buoyant domestic economy continues to drive household incomes higher and increase purchasing power. With a population of over 240 million, vehicle ownership is low and the long-term growth potential in this market is very significant.
GDP growth is estimated at 6.3% last year, despite weakening exports in the second half of the year. Fixed investment also rose sharply, with foreign direct investment rising by 26% to USD 23 billion.
The main driver of economic growth was strong consumer demand, helped by low borrowing costs. Interest rates are at a historic low, with Bank Indonesia’s overnight lending rate anchored at 5.75% for the best part of a year.
Fourth-quarter sales rose by 28% to 299,361 units, from strong year-earlier sales of 233,307 units, reflecting the continued strength in consumer demand. The introduction of tougher lending criteria in June of last year have had only a limited impact on the market so far, although the extension of these regulations to the Syariah banking system at the end of 2012 may increase their impact.
New vehicle sales in Malaysia rose by 4.6% in 2012 to 627,753 units, from a 600,123 in the previous year, according to data released by the Malaysian Automotive Association (MAA).
The market gained momentum in the second quarter, once it had time to adjust to new registration procedures and minimum loan down-payment introduced at the beginning of the year. Also, the supply of CKD vehicles and parts from Thailand began to improve in the second quarter, following disruption from the Thai floods in the fourth quarter of 2011.
Sales in the fourth quarter expanded by almost 13% 169,306 units, thanks mainly to a 27% surge in vehicle sales in December. With no significant changes in legislation expected in the near term, the sharp increase at the end of the year is attributed to aggressive marketing, new affordable models and good availability of inventory.
GDP growth is estimated to have expanded by just over 5.0% last year, with a strong performance in the fourth quarter lifting the annual average. Strong domestic consumption and government expenditure offset much weaker export growth.
Continued strong growth in Government expenditure and recovering exports this year are expected to underpin further strong economic growth. The MAA forecasts sales will reach 640,000 units in 2013 – up 2% on last year.
Vehicle sales in the ASEAN region by market, 2009-12
Sources: www.AsiaMotorBusiness.com from industry sources.
View next/previous articles
Currently reading -
January 2013 management briefing: World markets (2)
28 Jan 2013 -