Home to some of the worst traffic jams in the world, the major cities of Southeast Asia would seem to reflect a booming demand for autos. So too would the prominence of the car as a status symbol in Asean, where the lack of four wheels generally means riding a motorbike or packing into a crowded bus. Yet even as rising earnings put meaningful disposable income into the pockets of many regional consumers for the first time, the short-term outlook for auto sales looks anything but smooth – although the long-term trajectory is clearly upward.
In the first two months of 2015, auto sales for the Asean 5 – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – have fallen by 6.2% year on year, or over 31,000 cars. The two largest markets, Indonesia (-6.2%) and Thailand (-11.8%) have severely contracted, and Malaysia (0%) has also stalled.
Strong growth in the still-nascent markets of the Philippines (21%) and Vietnam (73%) does little to offset the overall weakness because these countries account for a small fraction of the market.
Last year saw a 10.6% year-on-year drop in Asean 5 auto sales, despite GDP growth of 5% to 6% for most of the countries. Much of this can be blamed on a -33.7% year-on-year hangover in Thailand following a first-car tax rebate scheme that artificially pushed up demand in 2012-13. Sales were also sluggish in Indonesia (-1.8%) and Malaysia (1.6%) last year.
Consumer surveys conducted by Asean Confidential, an FT research service, indicate that auto demand in the Asean 5 will remain tepid into the second half of this year, with prospective buyers surveyed in the first quarter of the year saying they planned to scale back car purchases in every country but Vietnam.
Where have the aspiring buyers in the biggest markets gone? In both Thailand and Malaysia, household debt has climbed to nearly 90% of GDP, limiting the ability of many families to make new credit purchases.
Malaysians have also adopted a wait-and-see approach to auto purchases due to a new goods and services tax, while Thailand will need a few more years to digest the vehicles purchased under its first-car scheme. Indonesians, meanwhile, have recently seen the end of fuel subsidies and higher retail prices due to the sliding rupiah.
Data from Asean Confidential’s brand survey show that market leaders Toyota and Honda will be the most impacted by slower sales in the region, followed distantly by Nissan, Ford and others.
Toyota (23%) is the favourite brand across Asean 5 survey respondents who plan to purchase a car in the next year, and holds the top position in each country except Vietnam.
Copyright The Financial Times Limited 2015
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