Automakers Raising Stakes in Southeast Asia Markets

Malaysian automaker DRB-Hicom will export the Volkswagen Polo and Jetta models it assembles to Indonesia.

International Trade and Industry Minister Mustapa Mohamed says the initial shipment will consist of 500 completely knocked-down units assembled at the DRB-Hicom automotive complex in Malaysia.

“The export is in line with government’s aim to see more export for locally produced cars, and DRB-Hicom’s objective when it allocated more than 1 billion ringgit ($274.6 million) in setting up this complex in Pekan,” the government’s Bernama news agency quotes Mustapa as saying.

“Indonesia will be the first country (to receive Malaysian exports) because of the facilities provided by its government for DRB-Hicom to export the cars.”

In addition to VW, DRB-Hicom assembles cars for Tata, Honda, Isuzu, Suzuki, Mercedes-Benz and Foton. It also owns Proton, the national car manufacturer.

Meantime, in neighboring Thailand, the Bangkok Post reports the growing attractiveness of Southeast Asia – and Indonesia in particular – as an investment destination for automakers is creating a crowded field in which Japanese manufacturers’ dominance could be challenged.

The newspaper says Ipsos Business Consulting believes Japanese producers will face increasing competition from the likes of General Motors and new faces including Volkswagen.

Volkswagen is planning its first factory in Thailand and Chukiat Wongtaveerat, consulting manager at the Thai unit of Ipsos, says VW is moving to enhance its profile in the ASEAN market with new product launches.

“Earlier, the automaker seemed to focus on exporting to Australia and South Africa,” Chukiat is quoted as saying.

Chukiat says all automakers should benefit from the freer flow of goods in the integrated ASEAN Economic Community, among them the Malaysian national cars Proton and Perodua, which have struggled for years to find markets beyond their home base.

“By 2016-17, we expect that Japanese automakers such as Toyota will seriously feel this challenge, as Ford and Chevrolet have yet to make this happen due to problems with their networks,” he says.

Strong branding, aftersales services and parts-supply networks built up over five decades have given Japanese manufacturers an advantage in both Thailand and Indonesia.

Piengjai Kaewsuwan, president of the ASEAN Automotive Federation, still believes it will be difficult for other competitors to beat Japanese automakers in the 10-country trade bloc.

Piengjai, vice president-government relations at Nissan Thailand, says GM and Ford have been in Thailand for nearly 15 years but have not been able to significantly challenge Japanese brands.

“When individual Thais think of buying a car, the first thing comes to mind is the brand, then price and service if any accident occurs,” Piengjai says. “I think Japanese brands have done well in these areas.”

Jessada Thongpak, senior analyst at IHS Automotive and a specialist in ASEAN light-vehicle production, says Indonesia has a huge market for cars due to its population and rising middle class.

“Most Indonesians want to buy MPVs and LCGCs (low-cost green cars) so the production portfolio there is still limited, but sales growth is for the long term and sustainable,” he tells the Post