Honda Motor’s automobile division is preparing to announce its best performance ever in South East Asia’s fastest-growing markets in 2004. The company’s combined share of the region’s top five markets rose to 9.3% last year, compared with 8.9% in 2003 and 7.0% in 2002. Its share of the region’s passenger car market inevitably is much higher, given its lack of presence in the commercial vehicle market, writes Tony Pugliese.
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Most of the gains were in the highly competitive small car segments, however, in the wake of the region-wide roll out of the Jazz sub-compact model which started at the end of 2003. Competition in the lower segments since has strengthened substantially, with Toyota’s product programme particularly aggressive last year. Profit margins are expected to have come under significant pressure as a result.
Overall vehicle sales in ASEAN’s top five markets combined, including Thailand, Indonesia, Malaysia, Singapore and the Philippines, are estimated to have risen by 21% last year to close to 1.78m units. All markets in the region enjoyed very strong growth, with the exception of the Philippines which suffered a 4.6% volume drop as tax changes put additional pressure on the market.
Indonesias market expands by 36% last year
The region’s fastest growing market by far last year was Indonesia, which expanded by 36.3% to a new high of 483,094 units to become ASEAN’s second-largest market and moving ahead of Malaysia. Demand was driven by low interest rates and a much improved range of compact, entry-level passenger vehciles. Singapore saw sales volumes rise by over 20% to record levels in excess of 104,000 units. Both Thailand and Malaysia also enjoyed record sales, with volumes rising by over 17% respectively.
ASEAN’s top five markets by volumes, 2002-04 | |||
| 2002 | 2003 | 2004 | |
| Thailand | 409,362 | 533,176 | 626,026 |
| Indonesia | 317,665 | 354,349 | 483,094 |
| Malaysia | 433,840 | 405,100 | 475,000* |
| Singapore | 65,617 | 86,299 | 104,172 |
| Philippines | 85,587 | 92,336 | 88,075 |
| Total | 1,312,071 | 1,471,260 | 1,776,367 |
| * estimate. Sources: industry sources. | |||
Honda’s combined vehicle sales in these markets, including estimates for Malaysia, amounted to close to 166,000 units – 27% more than in 2003 and record high for the company. The company made significant gains in some important markets, such as in Indonesia where its market share jumped from 6.1% to 9.6% while volumes more than doubled to 46,500 units. The addition of the hugely popular sub-compact Jazz model to its product line up at the beginning of the year was very much behind the increase. Last year, the car accounted for more than 53% of Honda’s total sales in that country -outselling the popular City model threefold and four times the sales volumes of the CR-V.
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By GlobalDataHonda’s peformance in Thailand was more muted last year, although this is already one of the company’s best-performing markets. Its market share was 12%, down from 13% in 2003 but nevertheless impressive considering that pickups account for around two-thirds of overall demand. Toyota’s strong product offensive last year put additional pressure on Honda, and products such as the Avanza, Wish and Vios have proved hard to beat for models such as the City, Stream and Jazz.
Honda Motor’s ASEAN sales and market share by market, 2002-2004 | ||||||
| 2002 | % | 2003 | % | 2004 | % | |
| Thailand | 54,266 | 13.3 | 69,069 | 13.0 | 75,005 | 12.0 |
| Indonesia | 13,113 | 4.1 | 21,650 | 6.1 | 46,500 | 9.6 |
| Malaysia* | 6,000 | 1.4 | 18,000 | 4.4 | 24,500 | 5.2 |
| Singapore | 4,717 | 7.2 | 7,060 | 8.2 | 9,269 | 8.9 |
| Philippines | 13,592 | 15.8 | 15,252 | 16.5 | 10,550 | 12.0 |
| Total | 91,688 | 7.0 | 131,031 | 8.9 | 165,824 | 9.3 |
| * includes estimates. Sources: industry sources. | ||||||
Malaysia remains predominantly a passenger car market, and the dominance of national car companies such Proton and Perodua make it difficult for the likes of Toyota and Honda to compete in the more price-sensitive lower segments. Here, the Accord is a strong seller, as is the CR-V. In the Philippines, changes to the way SUVs are taxed led to a dramatic fall in CR-V sales last year, while the Cirt and Civic remained strong sellers. The Jazz was launched in March, but sales volumes failed to take off like in other markets.
Honda’s regional capacity remains tight
The sharp upturn in most of the ASEAN markets has left Honda Motor with something of a capacity shortage in the region – particularly in indonesia and Thailand. The company has been optimising capacity utilisation at the expense of regionalisation and plant specialisation under the AICO product complementation programme. By contrast, Toyota has implemented the product complementation programme much more fully so far.
In Indonesia, Honda assembles the Jazz at its new plant in Karawang from kits imported from Thailand, and the Civic at its original plant on the outskirts of Jakarta also from kits imported from Thailand. It also makes the Honda Stream and CR-V in Karawang, which is now fully utilised.
The Stream is exported in CBU form from Thailand from Indonesia, while the Accord and City models also imported from Thailand. Honda still operates the CKD system in Malaysia and Philippines. With the exception of the City exports to Indonesia, CBU trade within AFTA remains limited and domestic demand still dominates local production and assembly.
In Thailand, Honda’s makes the Accord, Civic, City, Jazz and CR-V. The company is anxious to gauge the outcome of the proposed small car policy that the Thai government is proposing before making big decisions on new capacity expansion in the region. It is an enviable position in which to be, but a dilemma nevertheless.
Vehicle demand set to rise further in the ASEAN
Meanwhile, the automotive industry expects vehicle sales in the region to rise further in the short term, as GDP growth continues to outperform the rest of the world and with interest rates expected to rise only marginally. Toyota Motor Thailand’s president, Mr Ryoichi Sasaki, expects domestic sales volumes to rise by 10% this year, though with the commercial vehicle sector speaheading growth. He expects the passenger car segment will see a “slight improvement” after expanding by 17% last year.
In Indonesia, forecasts vary but all agree that there will be further growth this year. Toyota Astra Motor’s marketing director, Joko Trisanyoto, cautiously predicts growth of between 5-10% for the overall market to up to 520,000 units. The industry association Gaikindo is more bullish, predicting volumes to rise to 550,000 units. Elsewhere, demand in the Philippines is expected to recover this year after last year’s setback, while in Malaysia growth is expected to be more muted after a very strong 2004.
