Vehicle sales in the ASEAN moved strongly ahead in the first quarter of 2005, with volumes in the region’s five largest markets combined rising by almost 24% to 494,836 units. Weaker growth was seen in the Philippines, where economic conditions remain tough, and in Singapore, which is driven primarily by the de-registration of existing vehicles. Tony Pugliese reports.
But in Thailand, Malaysia and Indonesia, the strong momentum seen in 2004 continued into 2005, driven by new products and aggressive marketing. Indonesia in particular saw strong volume growth, with sales rising by 39% year-on-year in the January-March period – with growth concentrated in the compact utility vehicles segment in particular. Pickup truck sales helped drive the Thai vehicle market forward during the quarter, but the passenger car segment is starting to show signs of weakness.
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While strong growth continued in consumer spending and in the construction sector, the outlook for demand in the region is not entirely rosey. Inflation is on the rise due primarily to high oil prices and cuts in fuel subsidies. Consequently, interest rates are on the rise. Some of the region’s currencies have began to weaken – most notably the Indonesian rupiah. Raw material prices are rising and there are reports of supply shortages, particularly for steel.
The Korean companies in particular have been unable to get all the CKD and CBU stock they require for markets such as Indonesia and Malaysia, as priority is given to strong currency markets such as Europe.
There is also a growing fear that economic growth is slowing in the US and in some European countries, which would affect the performance of exporting economies such as Malaysia and Singapore in particular. Despite this, the industry is upbeat about the prospects for sales growth this year. Indeed, combined sales in the ASEAN trade block could rise to as much as 2m units, if sales in some of the smaller markets are counted.
ASEAN vehicle sales by country | ||||
2003 | 2004 | 1-3 2004 | 1-3 2005 | |
| Thailand | 533,176 | 626,026 | 147,597 | 166,486 |
| Indonesia | 354,349 | 483,094 | 103,586 | 143,986 |
| Malaysia | 404,920 | 479,049 | 94,035 | 127,113 |
| Singapore | 98,836 | 119,140 | 33,859 | 35,279 |
| Philippines | 92,336 | 88,075 | 21,005 | 21,972 |
| Total sales | 1,483,617 | 1,795,384 | 400,082 | 494,836 |
Source: Industry sources. | ||||
Thailand
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By GlobalDataSales in Thailand, the ASEAN region’s largest market, rose by 12.8% in the first quarter, mostly due to strong growth in the pickup sector following the launch of the Toyota Vigo last August and the Fortuner SUV derivative. Competition in the pick-up segment has risen sharply since then, with strong promotional campaigns helping to lift overall volumes. Passenger car sales have performed poorly in recent months, however, mainly reflecting a slowdown in new product activity. People carriers are gaining in popularity in Thailand, as the growing number of middle-class families require more comfortable transportation means.
The growth momentum in this market has slowed significantly overall and the industry is cautious in issuing forecasts. Tri Petch Isuzu expects the market this year will not exceed 680,000 units. Nevertheless, the second quarter is expected to be strong, as orders received at the Bangkok Motor show in late March are fulfilled.
But, as in other countries in the region, inflation in Thailand is rising, with high oil prices failing to slow the domestic economy. GDP growth rose by 6.1% in 2004, but growth is expected to have accelerated since then. Interest rates are expected to rise and this will begin to have an impact on consumer spending.
Indonesia
While the largest market in the ASEAN region remains Thailand, Indonesia is fast catching up as growth in domestic demand continued unabated. In the first quarter of 2005, sales volumes rose by 39% year-on-year after rising by over 36% in 2004. Despite higher inflation, a weakening currency, sluggish exports and increasing talk of interest rate hikes, the market is showing no tendency to slow down.
GDP growth is widely predicted to be around 5.5% for the full year, but most in the industry are cautious about growth prospects for the market. Sales are no longer broad-based, but focused in fewer segments – mainly low-cost. None in the industry are foreasting sales to exceed 540,000 units this year. But this in itself would be another record year for the market and the momentum going into the second quarter remains strong.
Most of the growth has come in the compact and small vehicle segments and in particular the low-cost people-carrier seegment that includes the Toyota Avanza, Daihatsu Xenia and the Suzuki APV. These models, particularly at entry level, have taken sales away from the used car market, which has seen prices fall sharply, as well as from the full-size utility vehicle segments and passenger cars. Sales of light and medium trucks have also shown strong growth, driven by the strong domestic economy.
Malaysia
Malaysia’s vehicle market also put in a good performance in the first quarter, with volumes rising by over 35% to 127,113 units – a new first-quarter record. The growth reflects further strengthening of the domestic economy and rising exports, as well as improving finance deals often with extended repayment terms. Although competition has increased substantially in the last couple of years, prices still remain artificially high due to a heavy tax burden designed to protect Proton, the national car company.
New tax rates and regulations are expected to be introduced at the end of June and will likely to be announced in May. While the changes overall are not widely expected to be significant, the The Malaysian Automotive Association (MAA) has attributed some of the strong growth in the first quarter to consumer uncertainty over future car prices. With Proton continuing to hemoerrage market share, there is rising concern that taxes could be increased in July to bail out the national car company and consumers may be bringing purchases forward because of this.
But some of the strong market growth has also come from new products, including the Toyota Avanza. Proton has two new models coming out this year, a replacement for the Tiara and another sub-compact car; Perodua will launch a small car based on the Daihatsu Cuore; while Toyota will continue the regional roll-out of the IMV range. So there is plenty to keep the market interested. The MAA forecasts 500,000 units for this year look quite conservative. But there is also scope for economic conditions to deterorate in the second half, especially in key export markets, and this would affect the economy here.
Philippines
Vehicle sales in the Philippines rose by 4.6% in the first three months of the year, with demand accelerating in March thanks to strong marketing campaigns by the vehicle manufacturers and aggessive financing promotions. Sales of utility vehicles were strongest, helped in particular by the February launch of the new Toyota Innova MPV, which is classed as an Asian utility vehicle (AUV) in this country.
The industry is upbeat about the prospects for growth in the immediate future, mainly as overall deliveries in the coming months will be boosted by the fulfilment of orders for the Toyota Innova. But economic conditions are getting tougher, with high oil prices adding to inflationary pressures, recent rises in interest rates and government debt all taking their toll on the consumer.
The market is also awash with used car imports, limiting scope for new sales growth. With little to stimulate strong economic growth in the short term, GDP growth for the year is forecast at around 4.5-5.0%. New vehicle sales are unlikely to grow significantly in the year as a whole. Most of the growth will be concentrated in the utility vehicle segment.
Tony Pugliese
