Robust Sales Pushing ASEAN to Become Sixth-Largest Auto Market by 2018

The Association of Southeast Asian Nations is driving toward becoming the world’s sixth largest automotive market by 2018, industry analyst Frost & Sullivan predicts.

Pushed by robust sales in Thailand and Indonesia, the region will see vehicle sales almost double in 2018 to nearly 4.7 million units in 2018 from 2.4 million in 2011.

Frost & Sullivan Asia Pacific Automotive Practice Research Manager Vijayendra Rao says that individually, none of the 10 member countries feature in the top-10 markets globally. But the region as a whole has assumed greater importance as a result of the ASEAN Free Trade Agreement signed in 2010.

Healthy rivalry among ASEAN member countries to attract foreign investments also has helped growth.

The Frost & Sullivan analysis from covering the four key automotive regions – Indonesia, Malaysia, Thailand and Vietnam – finds the ASEAN market likely will post a compound annual growth rate (CAGR) of 10.1% in the 2011-2018 timeframe, primarily due to sales gains in Thailand and Indonesia.

Hong Kong-based Rao says Thailand and Indonesia vehicle deliveries are likely to hit 1 million units each by 2013, crediting local demand, increased buying power and significant investment by Japanese auto makers.

He says Indian and Chinese auto makers are looking to expand in ASEAN, which is seen as a competitive production base and a net vehicle exporter with strong competency in certain product ranges.

“Thailand is expected to continue its dominance as a production hub in ASEAN due to the significant investments by Japanese OEMs, incentives from the government, a good supply base and required talents,” Rao says in a statement.

Production in Indonesia will continue to cater to local demand, mainly driven by the shift of ownership to cars, multipurpose vehicles and SUVs from motorcycles.

Passenger-vehicle deliveries are forecast to rise at a CAGR of 10.2% to 3.1 million units in 2018 from 1.5 million in 2011. Commercial-vehicle growth will be slower, with a CAGR of 9.8% to 1.6 million in 2018 from 780,000 in 2011.

Thailand

Rao says pickup trucks continue to be the most popular vehicles in Thailand despite slower-than-expected growth in 2011, although some consumers are beginning to favor cars.

“The younger generation of Thais prefers smaller cars and eco-cars, which are both stylish and affordable,” he says. “Most of these are hatchbacks and are perceived as sporty and fast.”

Toyota, Honda and Nissan will continue to be key leaders in the passenger-vehicle market in 2018, he projects.

Vehicle production is expected to grow at a CAGR of 11.9% from 2011 to 2018, while total sales likely will increase at a CAGR of 16.1%. “Production of passenger vehicles is likely to outpace commercial vehicles,” Rao says.

The analysis finds Thai consumers are showing an increasing preference for automatic-transmission vehicles with safety features such as an antilock brake system, airbags and comfort-enhancing features such as navigation and entertainment systems, including DVD players and TV.

Rao says foreign auto makers based in the country plan to launch about 40 all-new models and variants in the short-to-medium term, which likely will include 10 subcompact hatchbacks and sedans under the government’s eco-cars scheme.

Frost & Sullivan sees vehicle sales growing at a CAGR of 16.1% to 2.26 million units in 2018, driven by positive consumer sentiment, availability of new variants and models.

Government schemes such as first-buyer incentives and tax breaks for eco-cars also expected to stimulate domestic demand during the forecast period to 2018.

Indonesia

Rao says 2011 was a bumper year for Indonesia as industry volume grew 16.9% to 894,164 units, making it ASEAN’s largest automotive market.

The country’s growing middle class has increased the demand for affordable vehicles, with 150 million-200 million Indonesia rupiah ($15,870-$21,160) as the preferred price point for cars.

“Premium cars are also experiencing greater demand from the high income groups triggered by increasing buying power,” Rao says.

Multipurpose vehicles are the most-preferred segment in the market, and account for the top five best-selling vehicles. Compact cars, especially hatchbacks, are popular among young adults with high mobility.

Frost & Sullivan predicts vehicle sales to grow at a CAGR of 8.7% to 1.6 million units in 2018, thanks to steady economic growth, positive consumer sentiments, a low-interest-rate environment and the launch of new models and variants.

Vehicle production is forecast at a CAGR of 9.4% to 1.57 million in 2018. “Production of passenger vehicles is forecast to be more than 70% in the next few years with consumers’ increasing buying power and preference for personal vehicles,” Rao says.

Indonesia is a likely production hub for future low-cost green vehicles. It also will become the largest automotive production base in ASEAN as capacity increases to meet growing international demand, Frost & Sullivan says.

Malaysia

The Malaysian government’s decision to extend the full tax exemption of import duty and excise duty on hybrid and electric vehicles with less than 2.0L engines until Dec. 31, 2013, has led to considerable sales growth for such models, Rao says.

However, auto makers need to do more to educate the public about the technology and address consumers’ concerns about the maintenance cost of the vehicles, as well as introduce more stylish models to attract consumers’ interests, he says.

Vietnam

Vietnam’s total vehicle sales fell 2% in 2011 to 110,113 units, and Frost & Sullivan expects a 12% decline this year to 96,899, as the government implements restrictions on both imported cars and private-vehicle ownership.

Rao says total deliveries are expected to grow at a CAGR of only 1% to 117,961 units in 2018 because of the uncertainty in the market, especially the government’s unstable automotive-related policies.

Demand for passenger cars, especially those in the 2.0L segment and lower, is expected to rise due to their fuel efficiency and a size more suitable for road conditions in Vietnam.

The pickup-truck segment is seen continuing its steady growth, helped by stable economic progress and the vehicles’ suitability to Vietnam’s road conditions and consumers’ budgets.