Author: CHUNG Yoon Ngan
Date: 05-11-12 10:45
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Wheel power
http://www.chinadailyapac.com/article/wheel-power
By Karl Wilson
May 11, 2012 - 2:33pm http://www.chinadailyapac.com
The car, a by-product of affluence and growth, has become the symbol of success for millions throughout Asia.
At the same time it has unleashed pollution and gridlock on most regional urban centres as infrastructure fails to keep pace with the growth in automobile ownership.
The last two decades have seen fundamental changes in the global automotive industry through consolidation, mergers and the relocation of manufacturing to low-cost emerging and developing economies of Asia, says Biswajit Nag, economist and associate professor with the Indian Institute of Foreign Trade.
Countries such as Thailand and Indonesia have developed their automotive sectors through innovative government policies and trade liberalization programs, Nag says.
“These policies have brought significant benefits as private players stepped in with modern technology and foreign direct investment started pouring in, mainly through the hands of Japanese automobile majors,” Nag tells China Daily Asia Weekly.
Chinese automobile makers are also making inroads overseas. Last year, they delivered 849,500 automobiles to overseas buyers, 50.03 percent more than 2010, according to China Association of Automobile Manufacturers (CAAM).
Exports gained 56.74 percent to reach $11 billion.
According to CAAM, overseas sales, both in volume and value, surpassed the previous historic high reached in 2008. China’s major export markets for vehicles are Brazil, Algeria and Russia.
Great Wall Motors, one of China’s biggest exporters of made-in-China automobiles, plans to more than double overseas sales to 30 percent by 2015 from 14 percent by introducing new models. Wei Jianjun, chairman of the company, has outlined the strategy: To penetrate deeper into markets like Australia, where they have already exported, and beef up the brand image.
However, Chinese automakers’ export plans are complicated by a rising currency. A stronger yuan cuts the value of repatriated earnings and raises the prices of China-made cars overseas.
China is already the largest car market in the world and will continue to grow steadily throughout the rest of the decade, says global information company IHS.
According to IHS, the country will post annual sales of 30.68 million vehicles by 2020 — a staggering 74 percent from the 17.66 million sold last year. This year, sales in China are expected to climb to 19.21 million vehicles, helping it surpass the entire struggling market of Europe, which will end up with combined sales of 18.15 million.
China’s drawback — that despite being the world’s biggest market for car sales it still lags in research and development — is changing as Chinese companies look at buying internationally recognized brands.
In 2010 Zhejiang-based Geely Automobile took over Volvo from Ford in the biggest overseas auto acquisition by any Chinese company. This year, Volvo signed a technology transfer deal allowing the Chinese maker of low-cost cars to enrich its product portfolio and make it more competitive in its home market.
Another up-and-coming market is India, poised to surpass Japan as the second-biggest vehicle market in Asia by 2016, according to IHS.
The Japanese market had only 4.13 million sales last year, when production and supply chains were broken by the earthquake and tsunami in northeastern Japan and the worst flooding in Thailand in half a century ravaged manufacturing plants.
Tony Pugliese, analyst and director with automotive industry research and consulting company Asia Motor Business, expects to see Thailand bounce back this year after its automotive industry was crippled by last year’s flood.
“We expect to see sales in Thailand to exceed one million for the first time ever with much of that growth driven by the sale of pickup trucks,” he tells China Daily Asia Weekly.
Ford and Mazda last month announced they were investing $27 million in their Thailand joint venture AutoAlliance Thailand, which will increase pickup production by 20,000 units per year.
Japanese car giants such as Toyota, Honda, Nissan and Isuzu have invested heavily in Thailand as have American manufacturers such as Ford.
According to US-based automotive analyst group Fourin, Asia’s automotive industry continues to grow on the back of expanding domestic demand and increased exports.
“In the high economic growth markets of India and Association of Southeast Asian Nations (ASEAN) parts makers are actively boosting investment to meet expanding vehicle production,” it says in its annual report on the Asian auto industry.
Fourin says in ASEAN, investment is being boosted particularly into Thailand, which is establishing itself as the automotive hub for Southeast Asia, and Indonesia.
“Indonesia, with the region’s largest population, looks set to introduce policies to encourage the production and sale of low-cost vehicles as it aims to maximize growth for the vehicle and parts manufacturing industries,” it says.
“Furthermore, countries such as Malaysia, the Philippines and Vietnam are searching for growth strategies.”
South Korea and Taiwan are eyeing expansion into overseas markets as well as capturing global presence in the field of environmentally-friendly vehicles, such as electric and hybrid cars, it adds.
Indonesia is gearing up its automotive sector to go head-to-head with Thailand as the region’s premier automotive centre with investments of more than $2 billion over the next few years.
General Motors Indonesia has also reportedly started construction on a $150 million plant.
These investments are expected to increase Indonesia’s car production, which should exceed a million units this year.
“The problem now is ensuring Indonesia has adequate infrastructure and implementing the proper regulations, such as tax incentives,” Johnny Darmawan, chairman of the Association of Indonesian Automotive Industries, Gaikindo, said in an interview.
He said sales this year could be more than one million units compared with 850,000 last year and 764,000 in 2010.
Malaysia on the other hand is protecting its automobile sector from foreign competition by installing elaborately constructed barrier tariffs, investment-approval permits, differential excise taxes, subsidized credit, procurement arrangements and tax allowances.
Vikram Nehru, a senior associate and Bakrie Chair in Southeast Asian Studies at the Carnegie Endowment for International Peace, says this is designed to protect local brand Proton.
“Despite receiving substantial political, policy and financial support, Proton’s share of the growing Malaysian car market has been declining. The company now utilizes only 45 percent of its capacity and is steadily losing ground to its domestic and international competitors,” says Nehru.
Further south in Australia, the debate is no longer whether to expand the country’s long-established auto industry but whether or not the government should continue supporting it with taxpayers’ money.
Australia’s three remaining local manufacturers — Toyota, Holden and Ford — have been haemorrhaging for years. Unlike its northern neighbours, the Australian industry has failed to make a significant impact overseas and has even seen a major decline in its domestic market.
Ian Chambers, chief executive of the Federal Chamber of Automotive Industries, however refutes suggestions that the Australian automotive industry is on its last legs.
“In Australia, cars are more affordable today than they have ever been,” he said. “At the moment, Australians are being misled into thinking our industry is not part of the future.”
He said Australia’s automotive industry is helping to transform the country into the “fast moving, nimble, creative and high-tech economy we must be if our nation’s prosperity is to be secured into the future”.
karlwilson@chinadailyapac.com
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