108Industry Focus

In this article we will focus on two aspects. First, we will analyze crucial automotive markets in ASEAN, including Philippines, Indonesia, Malaysia, Vietnam, Thailand, and Singapore, within the time frame from 2009 to 2013. Second, we will brief on the trend and prospect of ASEAN’s automotive and parts industry by targeting its top 3 manufacturing bases in Indonesia, Thailand, and Malaysia.

Trend & Prospect for ASEAN’s Automotive & Parts Industry in 2014

by Chen-Chun Lin & Chia-An Chen

Fig. 1 Sales proportion of ASEAN countries during 2009 – 2013

Source: Marklines database, MII of MIRDC (2014/06)

ASEAN’s Automotive & Parts MarketIn 2011, the top 3 markets were Indonesia (around

870 thousand units), Thailand (around 770 thousand units), and Malaysia (around 600 thousand units). In 2012, Thailand topped the ranking by 1.41 million units, followed by Indonesia with its record high 1.12 million units. In 2013, Indonesia rose to the top by 1.31 million units, followed by Thailand at 1.26 million units (minor decline of 10%) and Malaysia at 630 thousand units. The sales in these top 3 remained high. Such an enormous market opportunity of ASEAN is attractive to many carmakers. In contrast, Philippine, Vietnam, and Singapore have relatively smaller market scale and influence. Figure 1 illustrates the sales proportion of ASEAN countries.

In 2014, Thailand underwent political and economic unrest, resulting in a significant sales drop of 45% in March. A market analysis institute predicts Thailand’s total automotive sales in 2014 will drop by 11.7% year on year to 1.175 million units. Favored by the investment of Japanese carmakers, Indonesia grew 17.8% in March this year. Indonesia has a great chance to remain as the top automotive market in ASEAN.

According to Frost & Sullivan’s (2013) report, Malaysia, Indonesia, and Thailand are ASEAN’s critical automotive parts manufacturing countries. CAGR of automotive parts during 2010 and 2018 is expected to reach 12.9%. The booming automotive sales of the three countries are the driving force for the growth of automotive parts.

Indonesian Automotive and Parts Industry

In 2012, Indonesian new car sales broke the benchmark of a million for the first time, landing at 1.12 million units. In 2013, Indonesia remained its upward trend and reached the record high 1.31 million units. This growth mainly derived from the increase in GDP (USD 3,500 on average) and the rapid growth of the middle class. Currently Indonesia has a lower rate of car possession and it has large growth potential that attracts more part suppliers to invest. Figure 2 illustrates detailed sales figures of the Indonesian automotive market.

So far Indonesia has just around 800 automotive parts suppliers, lower than Thailand’s 2,300

suppliers. Its largest automotive parts maker is PT Astra Otoparts Tbk (co-invested with MetalAer from Japan). PT Astra is located in Rajah Uang, the heartland and industrial cluster of car manufacturing 75 kilometers east from Jakarta. In 2013, Indonesia’s car export value was around USD 4.45 billion, which was mainly constituted by automotive parts exported to more than 70 countries. This year the export value is expected to grow another 10%.

Indonesia’s automotive part industry is dominated by OEM plants and Tier1 suppliers, most of which are related to Japanese companies topped by Toyota, Daihatsu, and Suzuki. Cultivating in Indonesia for decades, Japanese carmakers have developed a complete supply chain, and Tier2 supplies the after markets.

According to the data from Indonesian Industrial Ministry and Taipei Economic & Trade Office Indonesia, in 2013

Fig. 2 Indonesia's car sales and growth rate during 2019 - 2013

Source: Marklines database, MII of MIRDC (2014/06)

東協汽車與零組件產業之趨勢展望

109Industry Focusoverseas companies invested USD 1.2 billion

in Indonesian automotive parts. Carmakers like Toyota, Honda, and Suzuki all have plans to set up automotive part plants in Indonesia to cope with the demand of local car assembly plants and complete shipments in time. It is estimated that over 1,000 types of car parts will be manufactured locally. The plants will be located across eastern and western suburb of Jakarta and increase the employment by 11 thousand people. In 2013 Toyota announced it would increase USD2.7 billion in investment within the next 4 years, including expanding business in Indonesian parts industry and transforming parts suppliers into makers. The goal is to make Toyota’s export volume three times more than production volume.

Thai Automotive and Parts Industry

In 2012, Thailand’s automotive sales growth remained exponentially high at 82%, reaching 1.41 million units. In 2013, the sales dropped a little but still touched the high point of 1.26 million units. Refer to Figure 3 for detailed figures of Thailand’s sales.

Favored by the investment from Japanese carmakers and U.S. Ford, Thai automotive industry has been recently growing rapidly. It has already surpassed Indonesia since 2012, and in 2013 it continued to break records and landed at 1.31 million units, becoming the largest car manufacturing country at that time. The growth is mostly attributed to sales of pickup trucks, followed by passenger cars. The automotive and parts industry takes the largest proportion of Thailand’s export. According to data from the Thai Automotive Parts Manufacturers’ Association (TAPMA), the production value of automotive parts in 2013 was NTD 600 billion, divided fifty-fifty by export and domestic demand.

Thailand has been pursuing the role of “Asian Detroit” for long. Its automotive market growth attracts enormous foreign investment in automotive parts, especially the investment from Japanese companies which enter the market mostly by joint ventures. Currently Thailand’s automotive industry is constituted by carmakers, and Tiers 1 & 2 parts suppliers. Its suppliers are mainly invested by multinational companies.

The number of automotive parts makers totals around 2,300. There are 635 Tier1 part suppliers and they are categorized into three types: foreign investors, local Thai

Fig. 3 Thailand’s automotive sales and growth rate during 2009 – 2013.

Source: Marklines database, MII of MIRDC (2014/06)

2,355 companies and 525,000 employees in total

companies, and joint ventures. There are 1,700 Tier 2 part suppliers and they have relatively lower technical level. Refer to Figure 4 for details.

Fig. 4 Thailand’s automotive industry structure

Source: Thailand Automotive Institute; Thailand: Automotive Hub of Asia (2012), compiled by MII of MIRDC (2013/12)

Currently Thailand’s parts are mostly supplied to OEM car plants. 80% of local parts are used in pickup cars, and 55% are used in passenger cars. Most of the automotive parts are locally manufactured, except for auto-transmissions and hot-rolled iron and steel which have to be imported from Japan. The duty free condition for the automotive industry in ASEAN is a critical driving force for the growth of Thai automotive industry.

According to statistics from the Board of Investment of Thailand (BOI), there are around 1,000 Japanese SME investors in Thailand with a total investment value of THB 10 billion. Most of them are automotive part makers. Currently there are at least 28 Japanese suppliers, which are also among the top 100 global suppliers, setting up plants in Thailand. Among the top 100 global suppliers, 29 non-Japanese companies also set up plants in Thailand. The heartlands of automotive part production in Thailand are Bangkok, Rayong, Samuprakarn, Chonburi, and Pathumthani. The top 2 manufacturing bases are Bangkok and Samuprakarn.

Foreign Joint

Ventures

1. Tier1 Foreign Investors

2. Tier1 Thai Companies

3. Tier1 100% Thai-owned Companies

Domestic Thai Suppliers

14 carmakers & 7 Assembly Plants, 100,000 employees

Tier1

635 Companies, 250,000 Employees

Tiers 2 & 3 Suppliers

1,700 Companies, 175,000 Employees

110Industry Focus

Malaysian Automotive and Parts Industry

According to statistics for automotive sales, Malaysia sold 601 thousand units of vehicles in 2011, 627 thousand units in 2012, and 658 thousand units in 2013, growing at a minor pace annually with consecutive record highs. Figure 5 illustrates detailed figures.

Malaysian automotive industry is dominated by Proton and Perodua, which together account for 50% of the market share. Although Malaysian automotive part suppliers mainly service the domestic car demand, they also supply to carmakers like Volkswagen and Mercedes-Benz. This indicates that Malaysia’s automotive industry possesses a certain degree of manufacturing capability.

In 2010, the value of Malaysian automotive part export was around USD 871 million. In 2012 the value reached USD 1.35 billion, suggesting a significant increase of growth rate. At that time in Malaysia there were 45 Tier1 companies which mainly exported to Australia. Among them was Malaysia’s 2nd largest carmaker as well as a critical automotive part maker called Perodua Kancil, whose part sales in 2013 reached RM 243 million (USD 74.57 million), up 49.08% from the sales of 2009. This is a substantial growth rate. In addition to supplying to the domestic demand, Perodua Kancil also exports parts to Indonesia, UK, Singapore, Fiji, Mauritius, Malta, Sri Lanka, Brunei, etc.

One of the reasons for such an exponential

Fig. 5 Malaysian automotive sales and growth rate during 2009-2013

Source: Marklines database, MII of MIRDC (2014/6)

growth of Malaysian automotive part industry is the government’s policies for the automotive industry. One example is the “Free Industrial Zones” to grant auto part exporting companies with the advantage of tariff-free import in order to attract foreign investors. Another example is that as Malaysia is a Muslim country, it has amiable relationship with other Muslim countries (as in the Cooperation Framework Agreement signed with the Gulf Cooperation Council in 2011), and this will help in trade investment. One more example is that, in 2014 Malaysia announced the “National Automotive Policy” in hope of exporting at least 200 thousand cars and RM 10 billion (USD 3.015 billion) worth of automotive parts by 2020.

Prospect and SuggestionsThe demand of emerging markets has apparently boosted

the growth of the part industry. Recently the values of production and export of automotive parts in emerging markets have frequently reached their new highs, especially in Thailand and Indonesia. The domestic whole-car industry of these two countries is still in the growth stage, creating expectations of benefiting the automotive part industry and maintaining growth momentum. Particularly, Thailand is strong in the performance of auto-part export and its export is almost equivalent to the domestic demand.