Impact of AEC on Automotive Industry in ASEAN

Thailand.bc@ipsos.com
IMPACT OF AEC ON AUTOMOTIVE
INDUSTRY IN ASEAN
NOVEMBER 2014

2
Our Service Range in Automotive Related Industries
Automotive
Related
Auto OEM
Vehicle Parts
Other Vehicle
Related
Clients
Various types of vehicles:
• Commercial vehicles
• Passenger vehicles
Various types of parts &
components for vehicles:
• Engine and engine parts
• Filters
• Tires
• Other parts
Other auto-related products:
• Automotive lubricant
• Automotive painting
• Other products
Construction
Vehicle OEM
Product coverage
Various types of construction
vehicles:
• Excavator
• Bulldozer
• Forklift
• Dump truck
• Other construction vehicles

ASEAN AUTOMOTIVE MARKET

4
Snapshot of ASEAN Automotive Market
 Indonesia, Malaysia, Philippines, Thailand and Vietnam
have the most developed automotive industry in the region
 These five countries together produced 4.3 million vehicles
in 2013 – globally, this would rank them within the top five
vehicle producing nations
 Zero-tariff trade among ASEAN countries have the potential
to create a single market with population of over 600
million
 In turn, consumers are seeing greater and cheaper vehicle
choices
ASEAN
Automotive
Market
Impact of
AEC and
AFTA
 Japanese carmakers dominate ASEAN markets; Toyota is
the most popular Japanese brands and holds the highest
market share in most of the countries in ASEAN
 In recent years, Korean carmakers especially Hyundai and
Kia have significantly increased their presence in ASEAN
Competition
in ASEAN
Automotive
industry
IPSOSKNOWLEDGEANDEXPERTISE

5
ASEAN Automotive – The World’s Next Big Opportunity
 Increased Intra-ASEAN Automotive
Trade and Investment
 Abolition of regional tariffs
 ASEAN Custom Cooperation
 Increase in Technological Capabilities
 Harmonization of automotive
technological regulations
 Enhancement of ASEAN automotive
manufacturing ability
 Improvement in Human Resources
Capability
 Fostering of supporting industries
and human resources
 Mutual recognition of human
resources certification
How AEC affects ASEAN Automotive Industry
1. Significant boost in demand for passenger and
commercial vehicles
2. Emerging challenge on Japanese dominance
3. Emergence of ‘New’ Markets
Impact
1. Less than effective coordination among ASEAN
countries to implement AEC on time
2. Lack of infrastructure and capability
3. Changes in political situation
4. Policy harmonization
Challenges

6
-
500
1,000
1,500
Indonesia Malaysia Thailand Other ASEAN
-
500
1,000
1,500
2,000
2,500
3,000
Indonesia Malaysia Thailand Other ASEAN
Car Sales Volume, 2010 - 2013
Car Production Volume, 2010 - 2013
ThousandUnitsThousandUnits
17%
3%
-1%
18%
20%
2%
14%
-3%
With AEC Implementation, Vehicle Sales and Production among ASEAN
Countries Will be Further Accelerated
 Abolition of regional tarifs
 Automotive technology harmonization
 Total Economic Integration
 Harmonization of Regulations
 Fostering of supporting industries and
human resources
 Increased Intra-ASEAN Automotive
Trade and Investment
 Increase in Technological Capabilities
 Improvement in Human Resources
Capability
 Policy Harmonization amongst ASEAN
countries
 Increasing vehicle demand
 Increasing trade volume between
ASEAN countries
 Flourisihing Parts Manufacturing
Companies
 Exert pressure on vehicle price
 Part Standardization amongst ASEAN
countries
AEC
Impacts
Results

7
The Multiple Production Bases Across ASEAN Are Further Strengthen
by the Integration of ASEAN Through AEC
Complementary
Production Network
within ASEAN
Knowledge from
Germany
Investment from
outside of ASEAN
Investment from
outside of ASEAN
Investment from
Japan
With no tariff within the
ASEAN community, auto-
parts components are
easily being traded among
ASEAN member states in
order to leverage each
country core competency
in order to add value to
finished vehicles
 Transmission
 ID Parts and
Clutch
 Finished car
 Diesel engines
 Engine computers
 Hybrid Engine
 CKD parts for
MPVs
 Transmissions

8
Increase in Vehicle Sales and Production Will Proportionally
Increase Demand in Materials, Tier 1 and Tier 2 Parts
Steels
Plastics
Rubber and Tires
Electronics
Glass
Leather and Fabric
Machinery
Tools
Mold and Die
Jigs and Fixture
Passenger Cars
Pick-up Cars
Buses
Material
Supplier
Tier 2 Tier 1 OEM’s
Automotive
Dealers
Increasing needs for Materials, Tier 2, and Tier 1
parts as demand for vehicle booms
 Low logistic cost through efficient delivery
 Lower purchasing cost through higher local contents
 Ease of parts quality control
Concentrated suppliers (materials, tier 2, and tier 1) are more beneficial:

9
1. Thailand market share Dominated by Pick-Up Trucks (40%
as of September 2014), as people in Thailand prefer its
usage versatility
2. Government Policy such as the Eco-Car Policy encourages
Investment in Thailand Automotive Industry
Thailand
Indonesia
1. Market Share Dominated by Multi Purpose Vehicle
(Passenger Car)
2. Indonesian prefer MPV for their daily use due to its
versatility and ability to tackle Indonesia geographical
condition
3. Indonesian Government has initiated the automotive
production road map aims to overtake Thailand as hub of
automotive production in ASEAN
Malaysia
1. The only country in ASEAN that has successfully developed
national car brand
2. Strong local automotive brands in Malaysia, namely
Perodua and Proton, take control of the majority market
share as they offer various types of vehicles
3. Malaysian Government has strict policy of 100% parts
localization for national automobile manufacturer
Differences in Key Characteristics among Top 3 ASEAN
Automotive Markets
How AEC will impact the
characteristics
 Production and Sales of
Passenger Cars, especially
MPV, will be more
prominent in Indonesia. By
the current AEC
developments, Indonesia
aims to become MPV
production base in ASEAN
 Strong growth in Indonesia
as there are a very urgent
needs in transportation in
every Indonesian family as
public transportation sector
hasn’t been developed well
 Decline in Pick-Up Truck
sales in Thailand and rise of
MPV vehicles in Malaysia
and Thailand is expected as
MPV becomes a new trend
in ASEAN
4x2 = 2 wheel drive vehicles

10
12 16 13
170 690 280
340 1,700 200
Indonesia Thailand Malaysia
OEM
Tier 1
Tier 2
Number Auto-Parts Suppliers as of 2012
With Comparable Car Sales Volume in Thailand;
Indonesia’s Tier 1 & Tier 2 Parts' Manufacturers are Far Outnumbered
Indonesia
 Huge vehicle demand, low Tier 1 and Tier 2 suppliers
 Huge opportunity in Tier 1 and Tier 2 parts manufacturing market
Thailand
 Known for parts exporting ability since most auto-parts manufacturer concentrated in
Thailand
Malaysia
 Adequate tier 1 manufacturer, allows localization of national brand car
 Huge opportunity in tier 2 parts manufacturing market

11
Indonesia, A Rising Star on Aftermarket Parts Market
As the number of vehicles increase drastically, Indonesians are very concerned of an OEM aftermarket service. This
is one of the key components of determining a vehicle’s resale value.
After-market
driving factor
1. Wide Network of Authorized Service Center
2. Cheaper auto-parts Price
3. Faster Distribution of Auto-parts Supply Chain
Key success factors
in parts-retailing
businesses
1. Located in most major cities in Indonesia
2. Serving in 24 hours and offers free parts
delivery
3. Applies modern CRM (Customer Relationship
Management) System to ensure high
satisfactory of customer
Strategic steps into
Indonesian auto
market
1. Investment in Expanding 3S (Sales, Service,
Spare part) Network
2. Localization of Auto-Parts for lower selling price
3. Collaboration with local parts distributors
Current Aftermarket Trend
 In recent years, authorized
parts retailers have been
expanding throughout
Indonesia
 This business grows as
modern automotive retail
shops selling fast moving
parts, i.e. Car Battery, Shock
Absorber, Lubricants
 In accordance, Franchised
Repair Shops have been
growing too
 Example of success story of
Franchised Repair Shops:
Shop and Drive

12
Thailand Plan to Stay Competitive Post AEC Implementation
The main focus development will be
value added components. Below is the
list that was announced by automotive
institute in 2012:
 Transmission
 Hybrid electric system
 Light weight vehicle material
For other components, the plan will
primarily focus on increasing in
production volume, more complicated
and advanced components. This plan
is set to ensure that Thailand will
become a leading production base in
ASEAN
BOI special incentives for the following component segements:
• Automotive electronics
• Batteries for Evs
• Electronic stability control (ESC)
• Automatic transmission
• Continuously variable transmissions (CVT)
• Traction motors (for hybrid and electric
cars)
• Regenerative braking system
Engine Electronic components
Transmission
Braking System
Automotive Master Plan BOI (Thailand Board Of Investment)
BOI stated clearly that OEMs can source a high percentage of local
components. In order to get tax benefit from the BOI, a vehicle must have at
least 40% localization.

13
Growth of Hybrid Vehicles in Malaysia – Incentives of CKD
Hybrid Vehicle and Electric Vehicle
267 327
8315
15355
18967
0
4000
8000
12000
16000
20000
2009 2010 2011 2012 2013
Malaysia Hybrid Vehicle Sales
Vehicle
Category
Incentives
(Import and Excise Duty)
Build
Hybrid
Vehicle
100%
Exemption
CKD
Electric
Vehicle
100%
Exemption
CKD
Malaysia Key Government Incentives
For Hybrid and Electric Vehicle in 2014
 Duty exemption, reduced price difference, and launching of new models has been driving factors for
environmentally friendly vehicle in Malaysia for these recent years
 Substantial growth of hybrid and electric vehicle sales in 2010-2013 was caused by the incentives above. As
this incentive was first launched to invite vehicle manufacturer to assemble their vehicle in Malaysia
 However in 2014 this policy is considered not effective by the government. The government has since revised
that this policy will only affect CKD assembled car, this could be a problem since almost 90% of sold hybrid
and electric vehicles are in the form of CBU. The only CKD assembled car in Malaysia is Honda Jazz Hybrid
 This is an advantage for Proton and it plans to start offering hybrid vehicles next year
Note :
Incentive policy applies for vehicle s<2000cc
No incentive applies for vehicles >2000cc
CKD = Completely Knocked Down
CBU = Complete Build Unit

EMERGING CHALLENGE ON
JAPANESE DOMINANCE IN AUTOMOTIVE

15
Japanese Manufacturers Dominate More than 90% of Market Share in
Indonesia and Thailand
Market
Top 3 leading brands by vehicle sales in 2012
Indonesia
Thailand
Malaysia
36.5% 14.6% 13.3%
35.9% 14.9% 11.9%
30.1% 22.5% 16.8%
Strong Branding supported
with availability of own OEM
and Tier 1 Parts
manufacturing has given
Japanese manufacturer
advantage in both Indonesia
and Thailand
Japanese brands are preferred in Indonesia and Thailand because:
Superior sales and after sales service
High reliability and dual applications
Ease of part availability and simplicity of maintenance
Unlike other countries,
national brands hold more
than 50% market share in
Malaysia, much is attributed
to the government policy

16
There is an Increasing Challenge on Japanese Dominance in ASEAN,
How Much Can They Challenge the Japanese?
1. Foreign established OEM Manufacturers such as
GM, Ford and VW Group are very keen on
expanding their ASEAN market as they have
been re-utilizing and re-building their
manufacturing facility throughout ASEAN
2. By implementation of AEC, local Tier 1 and Tier 2
manufacturers in Indonesia and Thailand are
expected to emerge while starting their
expansion throughout ASEAN
3. Tax Exemption for 100% Localized Vehicle
combined with the AEC will help Malaysian
National Automotive Brand on their expansion
throughout ASEAN
Some of recent development in ASEAN countries
1. Indonesia
 At the end 2013, VW started to assemble its own
vehicle in Indonesia by collaborating with PT. Garuda
Mataram Motor Indonesia
 Chevrolet under GM Indonesia recently re-opened its
manufacturing facility in Pondok Ungu, Bekasi to
enter Low-MPV market in Indonesia
 Tata Motors is also set to establish its manufacturing
and distribution base for SEA, localizing assembly and
at least 40% of component production
 Additional flow of investment from Nissan, Suzuki,
Daihatsu, and Chrysler, totaling USD1.4 bn
2. Malaysia
 China is looking to invest RM 2 billion for engine
manufacturing facility include research and
development center worth RM500 million
3. Thailand
 VW reportedly planning their first Thai factory as
manufacturers rush for eco car gold
AEC implementation will exert challenge on
Japanese manufacturer
Japanese brands

17
It is Expected that Japanese Manufacturers Will Remain Strong in
ASEAN...
1. The importance of distribution channel
 Japanese players have the widest range of coverage and channels in
most ASEAN countries
 Huge investment required by other players to catch up with the
Japanese’s distribution channels in ASEAN
 Other players need to hit certain vehicle sales volume to justify
investment made in distribution channels
2. Strong brand awareness and footprints in ASEAN
 Japanese brands are perceived as reliable and long-lasting
 Good value-for-money for most Japanese vehicles in ASEAN

EMERGENCE OF ‘NEW’ MARKETS FOR
AUTOMOTIVE INDUSTRY

19
Despite the current downturn in the Thai market, majority of the
demands in vehicles is still from the powerhouse markets
ASEAN
Indonesia
Malaysia
Thailand
Other ASEAN
100% 85% 15%
 Although there is significant potential for growth in
the advancing markets especially in CLMV
countries; it is expected that over the next 5-10
years, the ASEAN Big 3 (Thailand, Malaysia, and
Indonesia) will continue their dominance in terms
of sales volumes
 This is mainly due to the growth from Indonesia
with CAGR of 12-17% in the past 5 years thanks to
the expansion of middle class population
 The still dominance in terms of vehicle
consumption in Powerhouse markets
(Indonesia, Malaysia, and Thailand
 The growth of advancing market
including CLMV, Brunei, Philippines and
Singapore
ASEAN future prospect
Demand Size Analysis
 It is expected that the production base will mostly
remain in the powerhouse countries since
manufacturers tend to choose to export cars into
other emerging countries as they can cut down
costs with the implementation of AEC
 Indonesia will surpass Thailand in terms of
production capacity since labor cost in Indonesia is
relatively cheaper together with the strong
domestic demand and location advantage for
exporting to Middle East and Africa
Supply Size Analysis

20
AEC Will Bring Significant Development in Advancing Markets
Myanmar and Philippines have the most promising opportunities in automotive sector
Myanmar  Myanmar is the world’s only newly opened market with GDP growth of 7.8% in 2014
 Being the newly opened and emerging market, implementation of AEC will attract a lot of
automotive brands to enter Myanmar
 While the automotive potential is big, Myanmar is not expected to be the production hub of
ASEAN
Philippines  Philippines economy has grown consistently in the recent years, achieving the highest GDP
increase of 7.2% in 2013
 AEC will develop current Philippines manufacturing capability as well as domestic car sales due
to the market competition
Cambodia  Cambodia has been able to manufacture its own self-modified electric car. The car is named as
Angkor EV 2014
 This development proves Cambodia’s capability and bright future in automotive industry. Sales
increase is expected in the upcoming years
Vietnam  Due to its inability to manufacture auto-parts on its own, lots of the world’s big automobile
groups have threatened to leave Vietnam because of the country’s weak supporting industries
 Vietnam is experiencing difficulties as its government hasn’t released any industrial friendly
policy
Levelofopportunity

CHALLENGES TO ASEAN AUTOMOTIVE
UPON AEC IMPLEMENTATION

22
Challenges For ASEAN
As the World will see ASEAN as a “One Big Country”
1. Effective coordination to implement AEC on time
 Ineffective coordination between ASEAN countries will cause further delay in AEC Implementation
 There has been rumors that there will be further delay of AEC Implementation until 2017 due to the
bad coordination within ASEAN countries. This challenge hasn’t been solved to date
2. Infrastructure and Human Resources Readiness
 As automotive demand is subject to increase after AEC implementation, there hasn’t been any definite
proof of definite supporting infrastructure development within ASEAN
 Apart from infrastructure, human resources act as other supporting structure in AEC Implementation.
After AEC every human resource in each country will directly be competing each other. It is a tough job
to equalize ASEAN’s current human resources capability to other developed countries worldwide
 These 2 supporting structures will affect ASEAN’s future automotive expansion in various sectors from
downstream to upstream such as in research & development, manufacturing, and others. This problem
has yet to be proven to date
3. Policy Harmonization Among ASEAN Member States
 Newly implemented AEC will require policy harmonization as different rules apply in each ASEAN
countries. Emission standard policy may become a main issue in the harmonization
 Ipsos predicts that countries with lower emission standard may have to comply with the standardized
emission requirements

23
2015 Outlook of Thailand Automotive Market
Thailand’s Automotive Industry set to grow by 15.4% in 2015
0
500
1,000
1,500
2,000
2,500
3,000
2009 2010 2011 2012 2013 2014 2015
Thousands
Thailand Automotive Production and Domestic Sales
Ipsos Business Consulting
Forecasted Automotive Production
in 2015 at 2.25 Million ( Up 15.4%)
Forecasted Domestic Sales in 2015
at 985,000 Units
 Automotive domestic sales should return to the growth path that existed before the disruption of the
First Car Scheme
 Domestic sales set to get close to 1 million units, stabilizing the domestic market
 Eco car production will play a central role in the return to growth in 2015
 Thailand will retain its position as the main automotive production hub within ASEAN
 Export production will see continued modest growth at 3%
Key Highlights of 2015

THANK YOU

Impact of AEC on Automotive Industry in ASEAN

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Impact of AEC on Automotive Industry in ASEAN

Ähnlich wie Impact of AEC on Automotive Industry in ASEAN (20)

Mehr von Ipsos Business Consulting

Mehr von Ipsos Business Consulting (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Impact of AEC on Automotive Industry in ASEAN