ANALYSIS: ASEAN sales up by 3.8% in 2011

New vehicle sales in the ASEAN region’s six largest markets fell by 15.4% to 585,036 units in the fourth quarter of 2011, from 691,517 units a year earlier, writes Tony Pugliese.

All automotive markets in the region in the fourth quarter were affected by the floods in Thailand, which is a key source of passenger cars, pickup trucks and parts. The Thai market inevitably was the worst hit, with fourth-quarter sales falling by close to 50%.

Cumulative ASEAN sales last year were just 3.8% higher at 2,596,633 units, compared with the 2,500,512 units in 2010. Only Indonesia reported a gain, of just under 17% to a record 893,164 units – making it the largest market in South-east Asia for the first time.

Most other markets reported slightly or moderately weaker full-year sales, reflecting the supply problems caused by last year’s two major natural disasters – the earthquake and tsunami in Japan last March and the floods in Thailand in the fourth quarter.

Only Singapore reported yet another sharp sales decline, of almost 25% to 35,904 units, as the government continues to focus resources on public transportation. Vietnam did well to close the year a little over 1% down at 110,938 units, with its economy continuing to struggle with high inflation and interest rates.

The industry overall is upbeat about the sales prospects for the region in 2012, despite the uncertain outlook for export markets in the West. Toyota expects Thai sales to jump by at least 20% to 900-950,000 units in 2012, as the industry restores production capacity and addresses the lengthy order backlog carried over from 2011. First-time buyer incentives are also expected to help drive sales this year.

Toyota also expects vehicle sales in Indonesia to rise to between 930-970,000 units, with cheaper car financing helping to push the market higher. Economic growth remained strong throughout last year and the vehicle market brings considerable growth momentum into 2012.

The Malaysian Automotive Association (MAA) expects sales to rise by 2.5% to 615,000 units in 2012 on the back of improving supply, new models and promotional activity. Meanwhile, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) expects its members to increase sales by 4-5% this year, also on the back on improving product supply and new model activity.

If these forecasts are accurate the regional market would likely approach 2.8 million units in 2012. The main threat to this outlook is the potential for the global economy to deteriorate further.

Thailand

New vehicle sales in Thailand fell by almost 50% to 123,121 units in the fourth quarter of 2011, as large parts of the country – including some important automotive industrial estates, succumbed to the worst floods in over 50 years.

Full-year sales fell by 0.8% to 794,091 units, after growing by 20% in the first nine months of the year. The country’s economy took a huge hit from the floods, with GDP estimated to have contracted by over 3% in the fourth quarter. This will have reduced full-year GDP growth to just 1.1%.

Most vehicle manufacturers were unable to supply product to the market in the fourth quarter, with most assembly operations closed for at least a month due to parts shortages. Honda was only major vehicle manufacturer to have been affected directly by the floods and its plant will be closed until the second quarter of 2012.

Furthermore, normal economic activity was severely disrupted in large parts of the country and dealer networks have also been damaged.

Economic growth is expected to remain sluggish in the first quarter of 2012, before picking up momentum in the second quarter once the country’s full productive capacity is restored. Government efforts to boost the economy continue, including tax incentives and “flood restoration” spending.
 
GDP growth forecasts for 2012 vary significantly, mostly within a 3-5% growth range depending on the outlook for key export markets. With the US economy showing signs of improving, Europe remains the main downside threat for exports.

The domestic economy no doubt will outperform, will significant stimulus measures and rebuilding activity driving growth. Raising the minimum wage will also likely boost growth in the short term.

The vehicle market, which was significantly undersupplied last year, is forecast to bounce back strongly from the second quarter – bringing full-year sales above the 900,000-mark.

Indonesia

New vehicle sales in Indonesia hit yet another all-time high in 2011, with total volumes rising by close to 17% to 893,164 units, even with supply shortages of some models due to the natural disasters in Japan and Thailand.

Economic growth is estimated to have reached 6.5% last year to exceed USD 1 trillion for the first time – despite the global financial turmoil and a slowdown in some export industries in the second half of the year. The main driver of growth was strong domestic consumption and investment.

Consumer and business confidence remains high, helped by historically-low inter-bank interest rates, at 6%, with further scope for cuts if additional stimulus is required.

Foreign direct investment rose by 20% last year to a record USD 19.5 billion, while government spending is also on the rise. The investment climate remains positive, as foreign companies look to take advantage of the country’s low wages as well as the good domestic growth prospects.

Fitch Ratings upgraded Indonesia’s credit status to investment grade in December, followed by a similar rating by Moody’s earlier this month. Standard and Poor’s is expected to follow suit soon. Regulatory changes on land acquisition were introduced last year to help the government speed up infrastructure investment.

The automotive industry remains very upbeat about the prospects for market growth this year, with greater competition in the financing sector reducing the cost of borrowing and with lending criteria expected to ease further.

New models from Toyota-Daihatsu and improving supply of other vehicles are also expected to be major positives for the market. With the US economy performing better than expected, the prospects for the country’s exports have improved.

One major negative overhang is the government’s need to reduce fuel subsidies, with some action expected in the second quarter. Also, Bank of Indonesia has recently discussed increasing downpayment requirement for car loans. This policy would have a major impact on sales if introduced.

Malaysia

New vehicle sales in Malaysia declined by 0.9% to 599, 877 units in 2011, after a similarly sluggish performance in the first nine months of the year, according to data released by the Malaysian Automotive Association (MAA).

Passenger vehicle sales fell by 1.6% to 535,112 units, while sales of commercial vehicles increased by 5.2% to 64,765 units.

The association attributes the market’s overall negative performance to supply constraints caused by last year’s earthquake in Japan and the floods in Thailand. Consumer and business confidence remains reasonably upbeat despite the recent turmoil in global financial markets.

Economic growth is expected to have slowed in the fourth quarter as a result of weakening export demand, particularly in the West. Full-year growth is estimated at around 4.7%, after growing by around 5% in the first nine months of the year.

The domestic economy this year will be underpinned by higher government spending and potentially lower interest rates from the current interbank rate of 3%. This will offset in part continued weakness in exports and help support local automotive demand.

The association is upbeat about the outlook for the vehicle market in 2012, forecasting sales to rise by 2.5% to 615,000 units – citing new model launches and promotional activity.  Other observers believe sales will be flat at best this year. Lower interest rates will be key in supporting further sales growth.

Vehicle sales in the ASEAN region by market, 2008-11

Tony Pugliese
www.AsiaMotorBusiness.com

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