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Due to the middle class demand along with the economy growth has propelled an exorbitant growth in the Asian auto industry. The vehicle sales in China is the world’s highest, that has recorded around 18.5 million units in 2011. Around the globe, hybrid and electric cars are the next focus, mainly because of global warming issues caused due to petrol and diesel vehicles.
Due to the growing middle class demand along with the economy growth has increased the vehicle sales and has propelled an exorbitant growth in the Asian auto industry in the last 10 years, reaching 30 million units in 2011 and having an annual growth of around 13% in the period between 2000 and 2011. During the same period, the growth in terms of vehicle sales in Europe was just 1% per year, as per the report given by EIC, a unit of Siam Commercial Bank Public Company Limited.
Between 2012 and 2020, by the overall raise of the number of households with annual disposable income over $10,000, the auto sales in Asia is predicted to grow more than 5% annually. In Asia, countries namely China, Indonesia, India and Vietnam will enjoy a double-digit compound annual growth rate (CAGR). Comparatively, in the same period, the developed countries are likely to experience an annual growth rate of less than 2%.
In some of the Asian countries namely China, Indonesia, India and the CLMV countries which include Cambodia, Laos, Myanmar, Vietnam, there is a huge potential for low level car ownership. The vehicle sales in China is the world’s highest, that has recorded around 18.5 million units in 2011.
The tremendous growth in the passenger car segment in Asian countries is driven by various factors. In Japan, most of the consumers are preferring hybrid and electric vehicles, due to environmental factors. In May 2012, out of the total number new cars sales were hybrid cars which had reached 19.7%, with a jump of 11 percent when compared to the previous year.
In 2012, the local brands of vehicles in Malaysia, did not have much growth in its market, consequently the country is welcoming more global brands. In Indonesia, around 70% of its market share is from multi-purpose vehicles (MPV). In Thailand, because of the government tax rebates, there was a huge growth in the small- and eco- car sales.
There are three major trends that are highlighted in the Asian automotive industry:
First, the Japanese automakers must focus on next-generation vehicles, which include hybrids, plug-in hybrids, electric vehicles, and fuel-cell powered vehicles, along with changes in domestic demand. By 2030, the market share of next generation vehicles namely hybrid, plug-in hybrid, electric and fuel-cell powered vehicles are predicted to have a growth from 20% to 40% as compared to the production of passenger cars in Japan which had gradually declined annually since 2005 by 1%.
Second, because of huge number of players, there is an increasingly intense competition in the Asian auto industry, with China and Cambodia evolving as newcomers, marketing their own brands. Among them, in 2012 Cambodia was only at the toddler stage in launching their locally designed and assembled electric-powered car. In the past 5 years, Chinese companies that include Changan, SAIC, and Dongfeng had experienced a CAGR above 15%.
Finally, Japanese auto makers are investing heavily on low car ownership, ranging from China, Indonesia, and Thailand, to India. Consequently, Asian automobile brand owners are expanding their overseas production. In 2011, 61% share of total global production was contributed by overseas production by Japanese carmakers, with a jump of 48% when compared to 2004. Honda has announced production plans for its Jazz Hybrid in its Melaka plant.
In 2012, South Korean companies namely Hyundai and Kia had produced more than half of their cars overseas when compared to 15% in 2004. Tata of India is also following the same path. The Chinese automotive firm namely SAIC is setting up to produce cars in eastern Thailand.
Thailand is a major production base in Asia. In 2012, due to foreign direct investment (FDI) in Thailand for the first 11 months, 100% growth in the automotive vehicles were seen, which had reached 434 billion baht i.e. US$14 billion, out of which 66% was from Japanese firms who had heavily invested in the auto industry of the country.
Indonesia’s market share of FDI was around $20 billion in 2012. 60 % of the market share in Indonesia was from Toyota, which is planning to invest a further $1.7 billion over the next five years. In this country there is a huge demand for domestic cars, despite a poor infrastructure. In order to equal to Thailand’s car ownership ratio, the country requires around 6 million more units.
Around the globe, hybrid and electric cars are the next focus, mainly because of global warming issues caused due to petrol and diesel vehicles. In North America, Central Asia and China, conventional gas reserves declined to 21 trillion cubic metres (tcm). In the Asia-Pacific region alone, the shale gas has added around 280 tcm to fuel reserves.
In the automotive industry, environmental issues, such as global warming has became a major concern for automotive companies in Thailand. Thus, it is important that the companies of this country focus in this direction as well in the near future.