New vehicle sales in the ASEAN region’s top-six markets combined rebounded strongly in the first quarter of 2010, with sales jumping by 41% to 564,177 units compared with depressed volumes of 400,671 a year earlier, writes Tony Pugliese.

The region’s recovery has been led by Indonesia, which reported a stunning 73% rise in first-quarter sales to 173,568 units – making it the ASEAN’s largest-single market for the first time. Thailand was close behind following a 55% rise in sales to 166,802 units; followed by Malaysia with 147,415 units; and the Philippines with 38,709 units.

Consumer and business sentiment continued to improve across the region during the quarter and rising exports helped to consolidate economic recovery. Interest rates remain at historically low levels, with inflation subdued by the recent currency appreciation. There is still significant pent-up demand in most markets after last year’s retrenchment, although smaller, lower-cost models continued to drive growth.

Two of the smaller markets, Vietnam and Singapore, performed negatively in the quarter, however. The moderate sales decline in Vietnam reflects more than anything the increase in VAT rates at the beginning of the year, as part of the government’s withdrawal of last year’s fiscal stimulus.

Interest rates are expected to remain relatively low in the region’s main markets at last till later in the year. Combined sales are expected to reach 2.1 million units in 2010, with some markets potentially posting record sales.

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New vehicle sales in Indonesia grew by 73% to 173,688 units in the first quarter of 2010, compared 100,260 units a year earlier, making it the ASEAN’s largest automotive market for the first time. Sales in March grew by close to 90% year-on-year to 65,368 units – the highest ever monthly sales volume, reflecting the increasingly buoyant Indonesian economy and persistently low interest rates.

GDP is estimated to have expanded by 5.6% in the first quarter, with exports rebounding from a year earlier and with investment rising. Inflation has remained subdued, helped by the recent appreciation of the rupiah which has allowed interest rates to remain unchanged at a historic low of 6.5%. The Bank of Indonesia has also taken steps to ensure that the low rates are passed on to consumers, making vehicle financing more affordable.

Passenger vehicle sales grew by close to 72% to 125,211 units, with compact MPVs spearheading growth. Sales of goods vehicles rose by 82% to 47,655, reflecting the acceleration in economic growth, while sales of medium and large buses rose by 42% 711 units.

The industry is increasingly optimistic regarding the full-year outlook for this market, with sales now widely forecast to increase by as much as 23% to over 600,000 units. Some manufacturers even expect 2010 to be a new record year for sales volumes, provided that interest rates are not increased significantly.

Thailand

The Thai vehicle market rebounded strongly in the first quarter, with sales rising by almost 55% year-on-year to 166,802 units, compared with depressed year-earlier levels, according to data gathered by Toyota Motor Thailand. This is the first sustained improvement in the overall market after four years of decline.

The Thai economy rebounded strongly in the fourth quarter of 2009, with GDP rising by 5.8% year-on-year, bringing the full-year decline to amore acceptable -2.3%. The fourth-quarter growth momentum has continued into the first quarter of 2010, with exports continuing to rebound strongly. Overseas demand for automotive products, which comprise a significant proportion of total exports, was particularly strong.

The domestic economy has also improved significantly, with stimulus spending and low interest rates helping to lift consumption. The Bank of Thailand left the overnight rate unchanged as 1.25% in its latest meeting and this will likely continue for at least the first-half of the year.

Demand for passenger vehicle continued to grow strongly in the first quarter, by 50% year-on-year to 66,247 units. Overall market growth was spearheaded by the commercial vehicle sector, however, with volumes rising by 58% to 100,555 units – after four years of decline. Demand for pickup trucks was particularly strong.

The full-year outlook remains positive, with significant pent-up demand yet to be released – particularly for pickups trucks. Low interest rates and cheaper financing will help bring more consumers to the marketplace. Toyota expects overall market volumes to reach 600,000 units this year – around 10% more than last year.

The recent political unrest after months of calm is the main threat to growth this year, with the travel and tourist sectors and overall business confidence likely to be hurt the most. With no resolution in sight between the government and protesters, consumer confidence is also likely to be affected.

Malaysia

Vehicle sales in Malaysia rose by 24% year-on-year in the first quarter to 147,415 units, compared with 118,681 units a year earlier, according to data released by the Malaysian Automotive Association (MAA). The improvement reflects rising consumer confidence and low interest rates.

The economy has rebounded strongly after declining by 1.7% in 2009, with a strong recovery in export demand driving growth in the manufacturing sector. Much of the stimulus spending announced by the government last year will likely be spent this year, helping to drive domestic consumption. GDP is widely expected to expand by at least 5.5% in 2010.

Vehicle market growth was strong throughout the first quarter, with sales increasing by 25% to 56,139 units in March, from 44,896 a year earlier. There is still pent-up demand in the marketplace after last year’s caution and this helping to support growth this year.

The industry expects a new record year for sales in 2010, with total volumes expected to reach 560,000 units. Inflation is beginning to pick up and the overnight lending rate was increase by 25 basis points to 2.25% in March, although it remains very low by historic standards. Further rate hikes are expected this year, which will dampen growth potential later on.

Tony Pugliese