ASEAN’s new vehicle market continued to decline in the third quarter of 2014, with sales in the region’s six main markets combined falling by 10.5% to 767,419 units, from 857,051 in the same period of last year, according to data compiled exclusively for just-auto by AsiaMotorBusiness.com.
Demand in Indonesia and Malaysia weakened in the third quarter after a positive first half of the year, while the rout in the Thai market shows now sign of abating. Sales in the region’s smaller markets continued to grow strongly, however.
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Cumulative sales across the region in the first nine months of the year were down by 10.7% to 2,383,402 units, from 2,668,883 units in the same period of last year.
After several years of strong growth, the new vehicle market in Indonesia turned negative in the third quarter. Sales declined by 5% to 291,632 units, according to data released by industry association Gaikindo, as higher interest rates, slowing economic growth and rising uncertainty took their toll on the market.
In the first nine months of the year, sales remained positive – rising by 2.7% to 932,943 units. The market looks somewhat saturated at current levels of economic growth and with few important new models coming on to the market. Full-year sales are likely to be flat in 2014 at around 1.23 million units.
Third-quarter sales in Thailand declined for the fifth quarter in succession, by almost 30% year-on-year to 207,205 units. This compares with weak year-earlier data, which had already declined by over 25% to 295,153 units. Cumulative nine-month sales fell by over 37% to 648,116 units, compared with 1,034,199 units previously.
The Thai economy has turned positive year-on-year since the first quarter of 2014, but only just, and confidence remains low. Tourist arrivals continue to decline despite a return to calm following the political unrest earlier this year, while exports remain lacklustre. Recovery next year is expected to be slow, after a 33% full-year decline in 2014.
The region’s smaller markets were all positive in the third quarter and year-to-date, with strong economic growth in the Philippines driving the market and vehicle ownership levels to new highs. Sales are expected to exceed 240,000 units this year.
Vietnam’s economy continued to recover from the high inflation years of 2011 and 2012, with low interest rates helping to drive domestic consumption and vehicle purchases. The Singaporean market also looks to be recovering from a multi-year slump, with sales previously driven lower by high taxes and a government focused on public transport.
Indonesia
New vehicle sales in Indonesia declined by over 5% to 291,632 units in the third quarter, compared with over 306,395 units in the same period of last year, with slower economic growth and tougher lending conditions affecting demand for new vehicles.
GDP growth is estimated to have fallen to around 5.2% in the third quarter, from over 6% a year earlier. Foreign direct investment (FDI) growth has slowed, with the imposition of export restrictions on iron ore at the beginning of the year affecting investment in the country’s mining sector.
This year’s presidential elections have also added to the policy uncertainty in the country. The new populist president Joko Widodo took office earlier this week, but it remains unclear how much support he will have in the legislature.
After several years of strong growth, the vehicle market looks saturated at current levels of economic growth. Sales in the first nine months of the year increased by just 2.7% to 932,943 units, helped by the introduction of a new range of cheap small cars sold under the government’s low-cost green car (LCGC) programme.
In the first nine months of 2014 sales of LCGCs amounted to 127,460 units, compared with one-month’s sales of 8,500 units in the same period of last year, according to data released by industry association Gaikindo. Sales of conventional light passenger vehicles fell by 12.7% to 559,743 units in the same period, while commercial vehicle sales fell by 4.8% to 246,340 units.
One of the first economic policies expected to be implemented by the new president will be an unpopular cut in fuel subsidies, expected in November. This should free up funds for investment in infrastructure, education and poverty reduction programmes.
In the short term, however, fuel subsidy cuts will also add to the cost of local transportation and thus will be inflationary. Interest rates could go a bit higher, putting additional pressure on household budgets.
Vehicle sales will likely be flat at around 1.23 million units this year, but further growth will be difficult in the short term without a significant pick up in the rate of economic growth.
Thailand
New vehicle sales in Thailand fell by 29.8% to 207,205 units in the third quarter, compared with already weak year-earlier sales of 295,153 units, according to data released by the Federation of Thai Industries.
Cumulative nine-month sales were down by 37% at 648,116 units, compared with 1,034,199 units previously. The market has taken a double hit over the last year: from the withdrawal of first-time buyer incentives at the end of 2012; and from a sharp economic slowdown triggered by political unrest, which culminated in a military coup in May.
Second-quarter GDP growth was 0.4% year-on-year, resulting in a first-half contraction of 0.1%. Third-quarter growth is expected to have picked up slightly, albeit against easier year-earlier comparisons.
Domestic consumption remains weak, with household debt having risen significantly in the last year, while consumer and business confidence remains depressed. The disbursement of public sector budgets by the military government has also been slow and fixed investment has continued to contract, by 7% in the second quarter.
Manufacturing output fell by 1.6% in the second quarter, with weak export growth unable to offset sluggish domestic demand. The recent political unrest also has had a significant impact on the tourism sector, which typically accounts for around 10% of GDP. Tourist arrivals fell by over 12% year-on-year in the second quarter and by an expected 10% in the third quarter.
Full-year vehicle sales are expected to come in at between 880,000-900,000 units, down by one-third compared with last year. Recovery is expected to be slow, with public sector spending expected to drive GDP growth of around 3-4% next year.
Malaysia
New vehicle sales in Malaysia fell by 8.8% to 159,163 units in the third quarter, from 174,522 units a year earlier, according to data released by the Malaysian Automotive Association (MAA).
The third-quarter decline came as economic growth continued to accelerate, reflecting high employment levels and strong consumer confidence. The threat of inflation prompted the central bank to raise its benchmark interest rate by 25 basis points to 3.25% in July and a further rate hike is possible before year-end.
Vehicle sales in the first nine months of 2014 increased by less than 1% to 492,305 units, reflecting a degree of market saturation after several years of strong growth. Buyers seemingly have been waiting for the launch of two important new models, with Proton Iriz and the Perodua Axia, as well as any indication of tax cuts in the 2015 state budget.
Economic growth forecasts have been widely upgraded during the last quarter, with a broad consensus of financial institutions pointing to GDP growth of between 5.6-6.0% for 2014 – underpinned by strong domestic consumption and rising exports.
New models such as the Axia and Iriz will help drive fourth-quarter sales, with total industry volumes for the full year expected to come in at around 670,000 units.
Vehicle sales in the ASEAN region by market, 2011-14
| 2011 | 2012 | 2013 | 2013(1-9) | 2014(1-9) | % ch | |
| Indonesia | 893,164 | 1,116,230 | 1,229,901 | 908,330 | 932,943 | 2.7 |
| Thailand | 794,091 | 1,436,335 | 1,325,079 | 1,034,199 | 648,116 | -37.3 |
| Malaysia | 600,123 | 627,753 | 655,793 | 487,970 | 492,305 | 0.9 |
| Philippines | 162,413 | 182,779 | 211,000 | 148,381 | 188,920 | 27.3 |
| Vietnam | 110,938 | 80,652 | 96,692 | 67,326 | 90,834 | 34.9 |
| Singapore | 35,904 | 33,914 | 27,374 | 22,677 | 30,284 | 33.5 |
| Total | 2,596,633 | 3,477,663 | 3,545,839 | 2,668,883 | 2,383,402 | -10.7 |
Source: www.AsiaMotorBusiness.com from industry sources
