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ANALYSIS: ASEAN sales declined further in Q4

By Staff reporter | 20 January 2014

Regional vehicle sales in southeast Asia are being dragged down by market weakness in Thailand.

Regional vehicle sales in southeast Asia are being dragged down by market weakness in Thailand.

New vehicle sales in the ASEAN region's six main markets declined by 12% to 873,336 units in the fourth quarter, from 992,567 units a year earlier, according to data compiled exclusively for just-auto.

Full-year sales increased by just 1.8% 3,452,166 units, from 3,479,427 units a year earlier, with worsening sales in Thailand weighing heavily on the regional market.

Sales in south-east Asia's largest market fell by over one-third in the fourth quarter, as the market adjusted to the withdrawal of first time buyer incentives at the end of last year. Deliveries of vehicles sold under this programme have now almost entirely dried up.

With buyers having brought forward sales to take advantage of the government incentives, and with growing political unrest in the country, not many people expect a return to growth anytime soon.

All other major markets in the region continued to grow in the fourth quarter, with most reporting record sales volumes for the year. Fourth-quarter sales in Indonesia increased by 7.2% despite rising interest rates, a sharp drop in the value of the rupiah and rising inflation - all of which are putting pressure on consumer spending power.

Malaysia and the Philippines also grew strongly, driven by buoyant consumer and business confidence and higher government expenditure. Vietnam too has begun to recover from two years of double-digit inflation. A series of sharp cuts in benchmark interest rates helped the vehicle market to rebound by almost 20% last year.

Thailand

New vehicle sales in Thailand fell by 33.5% to 290,880 units in the fourth quarter of 2013, compared with a record 437,618 units in the same period of the previous year, as deliveries of vehicles sold under the first-time buyers' incentive programme dried up.

Full-year sales fell by 7.7% to 1,325,079 units, from a record 1,436,335 units in 2012, with a strong first half more than cancelled out by a weak second half as the market re-adjusted to life without incentives.

GDP growth continued to weaken in the second half of the year, with third-quarter annualized growth revised down to 2.7% and fourth quarter growth expected to be even lower. Full-year GDP growth is expected to dip below 3% in 2013, compared with growth of around 6.5% in 2012, according to Finance Minister Kittiratt Na-Ranong.

While a second-half slowdown had been widely anticipated, the speed of the decline has taken many by surprise. Resurging political unrest has affected domestic sentiment considerably, with private consumption and fixed investment turning negative in the second half of the year.

Fixed investment declined by 6.5% in the third quarter and is expected to have also deteriorated further in the fourth. Bank of Thailand has cut the benchmark interest rate on several occasions in the last year, to a three-year low of 2.25% in January.

Many expect to outlook to gradually improve as 2014 progresses, with government infrastructure expenditure the catalyst for recover. But with political unrest likely to get worse before it gets better, economic growth forecast remain cautious. The government is is tentatively forecasting 2014 GDP growth at 4%.

The automotive industry is also cautious about the short-term outlook for vehicle demand, with Mazda Sales (Thailand) marketing director Sureethip expecting a further 10% decline to 1.2 million units this year if political unrest continues to undermine domestic sentiment.

Indonesia

New vehicle sales in Indonesia increased by 7.2% to 321,622 units in the fourth quarter of 2013, despite growing headwinds in the form of rising interest rates and some hefty price increases by the manufacturers.

Full-year sales were 10.2% higher at a record 1,229,901 units, from 1,116,230 units in 2012, driven by strong demand for passenger vehicles and helped in part by the introduction of low-cost green cars (LCGCs) in the last four months of the year.

The country's economy so far has managed to shrug off the huge 21% drop in the value of the local currency against the US dollar last year. GDP growth is estimated to have expanded by 5.6% in 2013, with fourth quarter growth estimated at around 5.4%.

Policies implemented since last August aimed at easing the current account deficit have begun to stabilize the domestic currency and other financial markets.

Inflation shot up to an average of around 8-9% in the second half of the year, triggered by cuts in government fuel subsidies last June. Several interest rate hikes followed shortly after, with the Bank Indonesia benchmark rate now at 7.5%, from a historic low of 5.75% this time last year.

These negative factors so far have had limited impact on domestic consumption, with government spending, the construction sector and consumer spending continuing to grow strongly. The main drag on the economy remains the weak export sector, low commodity prices and slowing growth in fixed investment.

These lagging sectors are expected to begin to recover this year, helping to underpin growth even as consumers come under increasing pressure from rising costs. Election expenditure will also help support domestic consumption in the first half of the year. GDP growth in 2014 is broadly forecast to remain unchanged from last year's levels, at around 5.5%.

Growth in vehicle sales is expected to slow significantly this year, with many predicting flat sales at best in 2014. Sales of new entry-level LCGC models will help underpin overall demand, by helping to improve car affordability and encouraging people making the transition from two-wheeled vehicles.

Malaysia

After rebounding strongly in the third quarter, Malaysia's new vehicle market declined by 3% to 164,152 units in the fourth quarter, from 169,282 units a year earlier- according to data released by the Malaysian Automotive Association (MAA).

Full-year sales expanded by 3.9% to a new record of 652,120 units, however, with new models from Proton and Perodua and growing demand for foreign brands helping to stimulate demand.

The market last year was underpinned by strong domestic economic growth, accommodating levels interest rates and buoyant consumer sentiment. GDP growth is estimated to have expanded by 4.5%, with government expenditure and private consumption driving growth. Exports are estimated to have grown only slightly, by between 1-2%, in line with subdued global demand.

GDP growth forecasts for this year range between 5-6%, with export demand expected to pick up throughout the year and domestic growth remaining buoyant. The vehicle market is widely expected to grow by 2-3% to around 665,000-670,000 units.

Vehicle sales in the ASEAN region by market, 2010-13

  2010 2011 2012 2013 % change
Thailand 800,367 794,091 1,436,335 1,325,079 -7.7
Indonesia 764,710 893,164 1,116,230 1,229,901 10.2
Malaysia 605,156 600,123 627,753 652,120 3.9
Philippines 170,216 162,413 182,779 211,000 15.4
Vietnam 112,224 110,938 80,652 96,692 19.9
Singapore 47,839 35,904 33,914 27,374 -19.3
Total 2,500,512 2,596,633 3,479,427 3,542,166 1.8

Sources: www.AsiaMotorBusiness.com from industry sources.

Tony Pugliese