In this month’s management briefing Tony Pugliese takes a close look at the growing automotive markets and industry in the ASEAN area of southeast Asia. Part 1 examines the region’s national vehicle markets.
Regional Q3 sales rise by 14.6%
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New vehicle sales in the ASEAN region’s six largest markets increased by 14.6% to 711,808 units in the third quarter of 2011, from 624,073 units a year earlier, according to data provided by www.AsiaMotorBusiness.com from various industry sources.
All markets in the region benefited from improving product supply in the third quarter, as vehicle manufacturers affected by the Japanese earthquake and tsunami in March restored most of their operations, including severely disrupted component supply chains.
Cumulative sales for the nine-month period amounted to 2,011,597 units, 11.2% higher than the 1,808, 995 units sold in the same period of last year. The regional market was led by Thailand and Indonesia, with sales growth in excess of 20% and 18% respectively in the first nine months of the year – to new record levels.
Vietnam was the only other market to report positive growth, with deliveries up by just 3.2% in the nine-month period. Sales in Malaysia were slightly lower, while in the Philippines sales fell by 3.2%. In Singapore, where the vehicle market is strictly controlled by the government, sales dropped by almost 29%.
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By GlobalDataThe fourth will be a difficult quarter of the region’s markets. The turmoil in the global financial markets has begun to affect sentiment, although governments have started to respond by loosening monetary policy.
The floods in Thailand are expected to have a negative effect on domestic sales for at least two months, until well into November, as manufacturers once again struggle to overcome disruption from a natural disaster. Other markets in the region will also likely be disrupted by shortages of Thai-made vehicles and components.
Regional sales are expected to exceed 2.6 million units in 2011, at least 4% higher than in 2010, with Thailand and Indonesia increasing their dominance.
Vehicle sales in the ASEAN region by market, 2008-11
| 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change | |
|---|---|---|---|---|---|---|
| Thailand | 615270 | 548871 | 800367 | 556359 | 670970 | 20.6 |
| Indonesia | 607805 | 483548 | 764710 | 556239 | 659857 | 18.3 |
| Malaysia | 548115 | 536905 | 605156 | 453249 | 450244 | -0.7 |
| Philippines | 124449 | 132444 | 170216 | 126900 | 122785 | -3.2 |
| Vietnam | 111946 | 119868 | 112796 | 78180 | 80678 | 3.2 |
| Singapore | 108478 | 76397 | 47839 | 38068 | 27063 | -28.9 |
| Total | 2116063 | 1898033 | 2501084 | 1808995 | 2011597 | 11.2 |
Sources: www.AsiaMotorBusiness.com from industry sources.
Thailand
Thai vehicle sales increased by over 28% to 238,158 units in the third quarter of 2011, from 186,151 units a year earlier, as vehicle production recovered from the supply-chain disruption in the second quarter.
Cumulative sales in the first nine months of the year increased by 20.6% to 670,969 units, despite an almost 5% decline in the second quarter as vehicle manufacturers struggled to overcome component shortages.
Passenger car sales performed strongest over the nine-month period, helped by the increasing availability of low-cost “eco-cars” and other small cars. Preliminary data shows that cumulative sales increased by 23.5% to 304,230 units, from 246,340 units a year earlier. Commercial vehicle sales are estimated to have increased by 18.3% to 366,739 units, from 310,019 units a year earlier.
Vehicle sales in Thailand by type, 2008-11
| Vehicle type | 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change |
|---|---|---|---|---|---|---|
| Passenger vehicles | 219840 | 224084 | 346750 | 246340 | 304230 | 23.5 |
| Commercial vehicles | 395693 | 324774 | 453617 | 310019 | 366739 | 18.3 |
| Total | 615532 | 548858 | 800367 | 556359 | 670969 | 20.6 |
Sources: Industry sources.
Thai vehicle manufacturers once again are experiencing severe disruption to their operations as a result of a natural disaster. Severe flooding in the country’s northern and central regions brought vehicle output to a halt in October, with a large number of industrial estates across the country inundated by floodwaters.
Disruption to logistical and supply-chain networks will likely last until well into November, as will damage and disruption to dealer networks in the affected areas. The floods are expected to have a significant impact on full-year GDP growth, with economic output and exports disrupted by the floods.
For the vehicle market, there was already significant pent-up demand from the supply shortages of the second and third quarters. This is likely carry through well into 2012.
The fourth quarter is traditionally peak sales season for the vehicle market, with the international motor show in Bangkok at the end of November normally providing the final sales push of the year. For many car companies it may come too soon, as they focus on damage limitation and restoring operations.
Honda has been the worst affected, with domestic and export sales also will likely to suffer in the fourth quarter.
Full-year sales are likely to reach a record 860,000 units this year, even with a 20% drop in sales in the fourth quarter. Much will depend on how long the flood crisis will last and the speed of recovery of the auto industry.
The government’s first-time vehicle buyer incentive programme is likely to help support domestic sales, although most of these will likely come through in 2012.
Indonesia
New vehicle sales in Indonesia picked up momentum in the third quarter of 2011, with total industry volumes rising by over 20% to 240,199 units compared with 199,537 units a year earlier.
Market growth had slowed markedly in the second quarter as key vehicle manufacturers struggled to maintain normal operations in the wake of Japan’s earthquake in March.
In the first nine months of the year, vehicle sales increased by 18.6% to 659,857 units, from 556,196 units in the same period of last year, according to data released by industry association Gaikindo.
Leading the market forward were strong sales of trucks and vans, with volumes rising by over 29% to 206,674 units. This reflects continued strong growth in the domestic economy in particular.
Sales of passenger vehicles increase by over 14% to more than 450,133 units, with demand for compact MPVs continuing to grow strongly even as some key models are close to the end of their cycles.
Vehicle sales in Indonesia by type, 2008-11
| Vehicle type | 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change |
|---|---|---|---|---|---|---|
| Passenger vehicles | 425267 | 359367 | 541475 | 393412 | 450133 | 14.4 |
| Trucks/vans | 175646 | 121712 | 219058 | 160015 | 206674 | 29.2 |
| Medium/large buses | 2861 | 2469 | 4177 | 2769 | 3150 | 13.8 |
| Total | 603.774 | 483548 | 764710 | 556196 | 659857 | 18.6 |
Source: Gaikindo.
The medium and large bus market also continued to grow, reflecting ongoing growth in demand for domestic travel as average household incomes continued to grow.
Economic growth has so far remained largely unaffected by the recent global financial turmoil and weakening export markets. The government still expects full-year GDP growth to exceed 6.0% this year, and probably higher than last year’s 6.1% growth.
Inflation has eased for the time being, reducing the pressure on consumers. Exports in the first eight months of the year increased by 36.6% to a value of USD 134.85 billion, although slowing demand in the West and weaker prices will likely affect export earnings in the fourth quarter.
The Bank of Indonesia responded to the growing unease caused by the recent turmoil in financial markets by reducing interest rates by 25 basis points to 6.5%, thus providing additional liquidity to the domestic economy.
The industry is optimistic that the domestic market will continue to grow in the fourth quarter, as more pent-up demand is fulfilled and as buyers are drawn in by lower interest rates. Full-year sales will likely exceed 850,000 units this year, which would be a new record for the market.
Key new model launches in the fourth quarter will likely help underpin growth next year, including replacements for the country’s best-selling Toyota Avanza and Daihatsu Xenia models. At the end of 2012, new incentives are expected to be introduced to promote domestic production and sales of small cars. This will provide the market additional scope for growth.
Malaysia
New vehicle sales in Malaysia improved marginally in the third quarter of 2011 to 153,041 units, from 152,134 units a year earlier, according to data released by the Malaysian Automotive Association (MAA).
The supply-chain situation in Japan continued to improve in the third quarter, allowing affected manufacturers to lift output. Offsetting this was further monetary tightening in the third quarter and increasing economic uncertainty due to the global financial turmoil, however.
Cumulative sales for the first nine months of the year were down by 0.7% at 450,244 units compared with 453,249 units a year earlier. Dragging the market slightly lower was a 1.4% drop in passenger vehicle sales, including passenger cars, SUVs, MPVs and window vans.
Sales of goods vehicles were up by 5.8% at 46,520 units, while sales of medium and large buses jumped by almost 28% to 1,048 units.
Vehicle sales in Malaysia by type, 2008-11
| Vehicle type | 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change |
|---|---|---|---|---|---|---|
| Passenger vehicles | 497459 | 486342 | 543594 | 408450 | 402676 | -1.4 |
| Goods vehicles | 49544 | 49502 | 60481 | 43979 | 46520 | 5.8 |
| Medium/large buses | 1112 | 1061 | 1081 | 820 | 1048 | 27.8 |
| Total | 548115 | 536905 | 605156 | 453249 | 450244 | -0.7 |
Source: MAA.
The outlook for the fourth quarter is for weakening economic growth, after growing by an estimated 4.7% in the first nine months of the year. Full-year GDP will likely be around 4.5%.
Exports are expected to be impacted by falling end-user demand in the West and from weaker prices, after a bounce back in the third quarter following as the Japanese supply chain came back on stream. The latest data, for August, shows exports rose by 10.9% to MYR 58.6 billion.
Domestic sentiment has remained stable so far, helped by falling inflation and the potential for rate cuts which has so far offset growing unease about the global economy. Fourth-quarter sales will likely weaken further moderately, with full-year sales likely to come in at just below the 600,000-mark.
Philippines
New vehicle sales in the Philippines were flat in September at 14,509 units, compared with 14,444 units sold a year earlier, according to industry sources including data released by Chamber of Automotive Manufacturers of the Philippines Inc (Campi).
Year-to-date sales for the January-September period fell by 3.2% to 122,785 units, compared with 126,900 units sold in the year earlier period. Campi attributed sluggish demand to continued tight inventories of key models, following disruption to automotive production in Japan earlier this year.
Sales of commercial vehicles fell by 4.6% to 78,687 units in the nine-month period, while passenger car sales were down just slightly at 44,098 units.
Vehicle sales in the Philippines by type, 2008-11
| Vehicle type | 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change |
|---|---|---|---|---|---|---|
| Passenger cars | 44426 | 46214 | 59544 | 44402 | 44098 | -0.7 |
| Commercial vehicles | 80023 | 86230 | 110723 | 82498 | 78687 | -4.6 |
| Total | 124449 | 132444 | 170267 | 126900 | 122785 | -3.2 |
Source: Industry sources.
Economic growth is expected to be around 4.5% in 2011, a sharp slowdown compared with the 7.3% GDP growth in 2010. Manufacturing and exports this year have been held back by supply-chain and demand disruption in Japan. Also, exports have continued to fall sharply in recent months as a result of the economic slowdown in the West.
Domestic stimulus measures, including higher government spending and lower interest rates, will likely be introduced in the fourth quarter to underpin the domestic economy.
The vehicle market is expected to decline further in the fourth quarter, as global economic uncertainty in the West increases. Supply disruption in Thailand, of both built-up vehicles and parts for locally-assembled vehicles, will also likely affect sales volumes in the fourth quarter. Full-year sales are unlikely to exceed 160,000 units in 2011.
Vietnam
New vehicle sales in Vietnam rose by 10% to 10,031 units in September, from 9,141 units a year earlier, according to data supplied by the Vietnam Automobile Manufacturers Association.
The increase follows a weak second quarter for the market, with local demand hurt by high inflation and continued devaluation of the local currency. Inter-bank interest rates peaked at around 14% in the second quarter, as did inflation.
Nevertheless, passenger vehicle sales have performed strongly throughout the year, despite the high interest rates. Sales in September rose by almost 30% to 6,134 units and almost 20% year-to-date.
Businesses have found the going tough and used imports from China and South Korea offer a more affordable alternative. Commercial vehicle sales fell by 12% to 3,897 units in September and by 13% to 34,307 units year-to-date.
Vehicle sales in the Vietnam by type, 2008-11
| Vehicle type | 2008 | 2009 | 2010 | 1/9/2010 | 1/9/2011 | % change |
|---|---|---|---|---|---|---|
| Passenger cars | 50874 | 62723 | 57778 | 38679 | 46371 | 19.9 |
| Commercial vehicles | 61072 | 56737 | 54446 | 39501 | 34307 | -13.1 |
| Total | 111946 | 119460 | 112224 | 78180 | 80678 | 3.2 |
Source: Industry sources.
Inflation and the local currency looked to have stabilized in the third quarter, bringing more optimism for the domestic economy. GDP growth is projected to expand by close to 6% this year, much lower than the 6.8% estimated for 2010. Vehicle sales should reach 105,000-110,000 range this year.
Tony Pugliese
