Report: ASEAN Region No.5 Global Auto Market by 2019

The 10-member Association of Southeast Asian Nations is emerging as a key global automotive sales and production hub, industry analyst Frost & Sullivan says in a report that predicts the region will become the world’s fifth-largest automotive market by 2019.

Frost & Sullivan Asia Pacific Research Director Vijay Rao says the ASEAN region offers global auto makers a significant opportunity in the near to medium term, as sales likely will grow at a compound annual rate of 5.8% to reach 4.71 million in 2019, mainly driven by rapid market expansions in Indonesia and Thailand.

ASEAN comprises Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Rao says the low level of motor-vehicle use in ASEAN offers strong growth potential for the automotive market, while the heavily motorized regions of Western Europe and North America represent a saturated “replacement” market.

Passenger-vehicle segments likely will dominate the ASEAN market, he says, noting Thailand, the region’s key pickup-truck market, is shifting to passenger vehicles as consumers show increasing preference for compact, environment-friendly ecocars.

ASEAN had a record year in 2012 as all the three key automotive markets – Thailand, Indonesia, and Malaysia – recorded historical highs in vehicle sales. Frost & Sullivan sees vehicle production in the region increasing at a compound annual growth rate of 8% to reach 7.05 million units in 2019.

“High economic growth, increasing disposable incomes, increased investments, expanding production capacities, and launch of new models are key drivers of automotive market in ASEAN, while global economic uncertainties, stricter regulations and taxes and growth of public transport are the key factors that are likely to restrain the market during 2013-2019,” Rao says.

THAILAND

Frost & Sullivan predicts vehicle sales in Thailand to increase 1.4% annually to 1.58 million units in 2019, up from 1.43 million in 2012. Growth will be supported by an improved economy, growing disposable income, capacity expansions by auto makers and launches of several new vehicle models.

Also driving vehicle sales in Thailand, Rao says, are the emergence of new breed of potential vehicle buyers such as youth and women.

“Thailand is likely to continue its dominance as a major production hub in ASEAN due to expected significant capacity expansions, increased export and domestic demand and availability of skilled labor force with a well-developed automotive component industry,” he says.

Thailand’s vehicle production is expected to grow 6.5% a year to 3.9 million units in 2019 and Japanese OEMs are expected to continue dominating the passenger-vehicle market in 2019. Rao predicts the 0.65L-1.0L engine segment will hold the highest share of the passenger-vehicle market in 2019.

INDONESIA

Indonesia’s vehicle sales likely will climb 10.9% yearly to 2.3 million units in 2019, making it ASEAN’s largest market, the report says. Gains will be driven by sustained economic expansion, a growing middle class with larger disposable incomes, increased investments in the automotive sector and introduction of regulations supporting market growth.

Rao says passenger-vehicle production volume in Indonesia likely will increase more than commercial vehicles as the industry focuses more on development of multipurpose vehicles and minicars.

“Foreign investment inflow for production expansion is also (intended) for the development of passenger cars,” he notes.

Indonesia’s total production volume is expected to reach 2.4 million units in 2019, up from 1.08 million in 2012.

More than 60% of Indonesia’s population is between 20 and 60 years old. “With such a high percentage of young population, the country has a huge potential in terms of production and income to support more consumption,” Rao says. “The so-called ‘golden age’ period is predicted to be maintained until 2030.”

On the downside, the report predicts the Indonesian government will introduce a number of restrictive policies such as minimum down payment on vehicle financing, set in the 20% to 30% range, depending on vehicle type and purpose.

MALAYSIA

Rao says for Malaysia to be promoted as a regional hub for hybrid and electric vehicles, the government may continue giving full exemption of import and excise duties on EVs and hybrids below 2.0L.

The exemptions helped boost sales of hybrid vehicles from 332 units in 2010 to 8,334 in 2011, and increasing 84% to 15,355 in 2012, but Rao says the tax breaks are scheduled to end Dec. 31 and the government is not saying whether they will be extended.

Also, the report notes, “The Malaysian market is expected to grow, supported by foreign-model proliferation at competitive price points and by price reduction as a result of market liberalization.”