Vehicle sales in South-East Asia’s six main markets rose by 5.8% to 1.87m units in 2007, with Indonesia and two of the smaller markets – the Philippines and Vietnam – reporting very strong growth, writes Tony Pugliese. Sales in Indonesia bounced back strongly from a sharp decline in 2006 as consumers responded to sharply lower interest rates.
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Strong economic activity helped drive sales in Vietnam to a new record high of 80,392 units, with pent up demand outweighing the high taxation and prices. The Philippine market was also lifted by strong economic growth, to levels not seen since before the 1997 Asia crisis.
The industry remains upbeat about the prospects for region’s markets this year, despite the increasingly gloomy economic expectations of key global markets. Toyota expects Thailand’s vehicle market to improve this year after two years of decline and for Indonesia to continue its recovery. Last year’s second-half upturn in the Malaysian domestic vehicle market is also expected to continue into 2008.
Vehicle sales in ASEAN’s top three markets combined are expected to reach 1.71m units in 2008 and sales in the whole of the ASEAN trade block could potentially reach 2 million units. This optimism would evaporate rapidly if some of the more pessimistic predictions for the US and some European markets play out this year, however.
Thailand
Thai vehicle sales fell for the second consecutive year in 2007, by 7.5% to 631,250 units compared with 682,500 units in the previous year. The market had begun to stabilise in the third quarter, after a weak first half, but dropped sharply – by 24.2% – in the key month of December.
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By GlobalDataThe sharp year-end drop can be mostly attributed to uncertainty ahead of the December 23rd general election and the announcement of tax incentives for ‘bio-compatible’ cars. The government announced in December that excise taxes would be cut from 30% to 25% on cars compatible with bio-fuels starting in January 2008. This is expected to have delayed car purchases in December and a rebound is expected to have taken place in January.
The passenger car segment was the worst hit last year, with an 11.3% decline to 170,117 units, so the tax cut is welcome news. Already, most models currently on sale are bio-compatible and big discounts have been offered since the beginning of the year.
Toyota believes the overall vehicle market will rise by 10.8% this year to 700,000 units, with passenger car sales leading the recovery to around 217,000 sales. The company expects to sell 310,000 vehicles domestically, to claim a market share of 44%. The first quarter will likely see a very strong rebound, due also to weak year-earlier comparisons when sales dropped by almost 19%.
The new government is looking to boost the domestic economy through higher spending this year in an attempt to restore consumer confidence, with infrastructure projects and populist policies at the top of its agenda. GDP growth is forecast to be similar to 2007 levels, at between 4.0-4.5%, with weakening export markets offsetting the domestic policy measures.
Indonesia
The Indonesian vehicle market rebounded strongly in 2007 from the sharp decline in the previous year, with volumes rising by 36.2% to 434,449 units compared with 318,910.
Domestic consumers have responded strongly to the sharp cuts in interest rates back to the more benign levels of around 8%, from a high of 12.5% at the end of 2005.
Economic growth in 2007 was strong, at around 6.5%, supported by strong domestic consumption and an export sector buoyed by high commodity prices. Investment in the oil and gas, mining and plantation sectors continues to show strength, which bodes well for future exports.
The high oil prices are also a concern for the economy, with the rupiah valuation largely unchanged against the US dollar over the last year and the cost of oil subsidies to the government escalating as a result. The appreciation of most global currencies against the rupiah has also put pressure of the vehicle manufacturers, which depend to a varying extent on OE imports from Thailand, Japan and the Euro zone. Some have been able to offset this increase through exports.
High fuel prices have encouraged a substantial downsizing in the market, with most private vehicle sales powered by 1.0-1.5L engines – especially compact MPV models such as the Toyota Avanza and Daihatsu Xenia. Combined sales of these two models approached 91,000 units last year, with CKD and CBU exports accounting for a further 46,000 units. Just a few years ago, it was the larger Toyota Kijang range that dominated the market. Last year, Toyota sold a total of 44,332 Innova – the successor to the Kijang, in Indonesia.
Including Daihatsu and Hino, the Toyota group sold a total of 213,981 vehicles in Indonesia, claiming a staggering 49.3% of the market, and produced an estimated 287,000 vehicles – including CKD kits for export.
Yoko Trisanyoto, PT Toyota Astra Motor’s head of marketing, remains upbeat about the outlook for the Indonesian market this year despite the weakening outlook for the global economy. He expects the market to continue to build on the current momentum and reach 500,000 units in 2008, based on average interest rates of 8.25%. Key growth segments are expected to be the compact passenger vehicle segment, which is expected to get more competitive, and commercial vehicles.
Malaysia
Malaysia’s vehicle market began to recover in mid-2007 after a poor first half, to finish the year marginally lower at 487,176 units. The upturn reflects a pickup in domestic economic growth, with fiscal measures such as high pay awards to civil servants helping to drive private consumption. A relaxation in lending conditions following a period of tightening also helped the market’s recovery.
Replacement demand has been building up following the sharp market decline in 2006 and the availability of new models, particularly at budget end, are helping to drive volumes higher. Even Proton has managed to make small market share gains in recent months following the launch of the Persona sub-compact car last August.
The Malaysian Automotive Association is upbeat about the prospects for the vehicle market this year, despite growing uncertainty overseas. It expects the positive sales momentum to continue well into 2008, with full-year volumes rising by 4.7% to 510,000 units. The business sector and the government remain confident that the economy will grow at a strong pace in 2008, at around 5.5% compared with an estimated 6% in 2007, with a slowdown in exports having only a moderate effect on the overall economy.
The Philippines
Vehicle sales in the Philippines grew 18.5% in 2007 to 117,903 units – the first time the market has reached six figures since the 1997 Asian crisis. The market has benefited from the strongest economic activity seen in over a decade, with GDP growth estimated at 6.7% last year.
Toyota reported sales of 45,091 units in 2007 for a market share of 38.2%, followed by Honda with 17,321 units (14.7%) and Mitsubishi with 15,005 units (12.7%). The Japanese car company accepts that this year market conditions will be more challenging, but failed to release a market forecast.
High oil prices and the resulting inflation will inevitably have an impact on economic activity, as will weakening export markets, particularly Japan and the USA. But the vehicle market has started the year well, with sales growing by 17% in January, according to the Chamber of Automotive Manufacturers of the Philippines.
Tony Pugliese
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Vehicle sales in the ASEAN by market, 2004-07 |
