HONG KONG: Difficult Times Flagged for Asia's Auto Industry

By Press Release | 20 October 2000

There are difficult times ahead for Asia's auto industry, says Graeme Maxton, the global automotive economist of The Economist Group.

"Despite the feverish optimism of the last few years, there are growing signs that the recent recovery is false," he says.

Mr Maxton will explain why the recovery is running into difficulties when he co-chairs The Economist Conferences' Fifth Roundtable on the Automotive Industry in Asia on November 16th - 17th 2000 at The Grand Hyatt Hotel in Singapore.

The last two years have seen car sales grow by more than 60% in Asia, outside Japan. However, according to Mr Maxton, there are signs that the rebound lacks momentum and sustainability.

"The big bounce-back is over", he says. "Asian economies are vulnerable to the slowdown planned in the US and the hike in oil prices. These factors are likely to cut exports, increase costs and reduce commodity prices."

The threats are compounded by the recent wave of global industry consolidation and by the push for free-trade. After the M&As of the last few years, six giant firms - Ford, General Motors, DaimlerChrysler/Mitsubishi Motor Corporation (MMC)/Hyundai Motor Corporation (HMC), Toyota, Volkswagen and Renault/Nissan - now dominate the world's auto industry. As these firms integrate, there will be a period of cutbacks to reduce excess capacity.

While many thought that Asia might escape the worst of this, there are growing signs that the region will be hit as much if not more than elsewhere.

Trade regulations will play an important role in the next few years too. Malaysia's decision to delay the opening of its auto sector until 2005 created a mixture of disappointment and understanding.

But China's entry to WTO is creating the opposite - an air of optimism and confusion. It seems so unlikely that one of the largest markets will really open up to foreign firms. Whether market liberalisation will really force corporations to think regionally instead of nationally, "doubtful," Mr Maxton commented.

E-commerce and the Internet also present challenges for the auto sector, which will change the industry's mindset and bring much greater price transparency.

Four main themes during the two days of dialogue will consider:

  • Can investors look forward again with renewed optimism?

  • How can Asia's automotive companies prepare for AFTA and WTO?

  • E-commerce: what will be the impact of B2B and B2C e-commerce for Asia's automotive industry?

  • How will the global consolidation of the industry affect the region and what cross-cultural lessons can be learned?

    There is also an exclusive interview with Jac Nasser, the President and CEO of Ford. Now that it has given up on Daewoo, what does the world's second largest carmaker have in store for Asia?

    This event is open to the media, please RSVP to Jennifer Iu at 852-2585-3808 or jenniferiu@economist.com

    Contact: Jennifer Iu