Despite steady growth, local auto sector lags behind Asean neighbors in sales

The Philippine automotive sector and its counterparts in the Asean are expected to become highly lucrative markets for global automotive firms in six years’ time, thus presenting huge opportunities for further expansions.

An analysis by Frost & Sullivan dubbed Strategic Analysis of Asean Automotive Outlook showed that the Asean market is seen to become the fifth largest automotive market by 2019, with compound annual growth rate estimated to reach 5.8 percent by 2019 or 4.71 million vehicles in terms of sales.

This will be driven mainly by rapid market expansions in Indonesia and Thailand.

Vijay Rao, research director for Asia Pacific at Frost & Sullivan, explained in a statement that the “low level of motorization in Asean offers strong growth potential for the automotive market, while the heavily motorized regions of Western Europe and North America represent a saturated replacement market.”

Even the Philippines is expected to catch up, at least in terms of sales, as local automotive firms anticipate bright prospects in the years ahead.

For this year alone, the local Chamber of Manufacturers of the Philippines Inc. (Campi) expects vehicle sales to hit 210,000 units from 156,654 units a year ago.

“The country’s continued strong performance, earning it the title of being the new tiger economy, augurs well for the industry.  Surely, we are now on the road to full motorization,” Campi president Rommel Gutierrez said in August.

While these numbers looked promising, the Philippines, however, continues to lag compared to its neighbors. Thailand sold the most number of motor vehicles at 839,053 units from the January-July period, followed by Indonesia with sales reaching 714,400 units. Malaysia came in third with sales of 381,919 units, while the Philippines sold only 102,913 units during the same period, data from the Asean Automotive Federation showed.

Meanwhile, total vehicle production in Asean is expected to grow at a compound annual growth rate of 8 percent from 2012 to hit 7.05 million units in 2019, the study by Frost & Sullivan showed.

Leading the production will be Thailand, which is “likely to continue its dominance as a major production hub in Asean due to expected significant capacity expansions, increased export and domestic demand, availability of skilled labor force with a well-developed automotive component industry,” Rao explained.

In terms of local automotive production, the Philippines has admittedly yet to make significant inroads in terms of implementing critical policies and incentives that will support the viability of this venture.

Local auto production reached only 43,233 units as of end-July this year, while Thailand continues to be at the helm with a production of 1.5 million motor vehicles from January to July. It is followed by Indonesia, which produced 692,666 units.

Malaysia’s motor vehicle production meanwhile reached 348,303 units, while Vietnam produced a total of 48,092 units during the same period.

The government, however, believes that the release of the road map for the automotive sector will propel the country’s position in the Asean.

At present, the government, through the Department of Trade and Industry, is finalizing this roadmap, which is expected to contain a revised set of fiscal, volume-based incentives that will revive and further boost the local automotive manufacturing sector.

“The road map is an attempt to put the Philippines in the auto manufacturing map in the Asean. At least three players, of which two are existing and one is new, are waiting for the auto road map,” Trade Secretary Gregory L. Domingo said.

Automotive players in the country, including Toyota Motor Philippines Corp. and Mitsubishi Motors Corp. are likewise awaiting the said road map, as this will largely become the basis for further and larger scale investments.

Asean Auto Sales

(January to July 2013)

Thailand    839,053 units

Indonesia   714,400 units

Malaysia    381,919 units

Philippines 102,913 units