Opportunities abound for Thai auto industry as CAFTA brings in new era

For multinational automotive firms as well as Thai and foreign auto parts and component-makers, golden opportunities lie ahead, given that CAFTA is now the world's largest free-trade area with a combined population of 1.9 billion.

China alone has 1.3 billion consumers, while the 10-nation Asean has nearly 600 million people.

Thailand will be among the major beneficiaries because its 40-year-old auto industry is the largest in Asean, with a combined capacity to produce more than 1 million vehicles per year.

One-tonne pickups and ecologically friendly cars will be the winners due to advantages gained from economies of scale.

However, Wallop Tia-siri, director of the Thai Automotive Institute, told Krungthep Turakij that the retail prices of automobiles in Thailand were unlikely to be reduced significantly as a result of CAFTA.

"There are cost reductions resulting from the exchange of parts and components among production facilities within Asean under the zero-tariff scheme, but such a benefit is not passed on to consumers.

"On the other hand, the scheme will likely increase the auto industry's profits," he said.

Suthad Setboonsarng, a Thailand Trade Representative and former senior official of Asean, told The Nation that the price of a compact car in the range of Bt400,000-Bt500,000 should be reduced by about Bt20,000 per unit.

"In principle, producers' costs are 5 per cent lower due to the zero-tariff scheme, so their tax saving is about Bt20,000 per unit if the unit cost is Bt400,000 exclusive of excise and other taxes.

"From now on, we should closely monitor whether consumers benefit from the CAFTA scheme in prices. Governments have to part with import-duty revenues to help promote free trade in the hope that overall sales will increase due to cheaper prices and that manufacturing and investment will further expand as a result of this scheme," said Suthat.

Suparat Sirisuwanangkul, assistant senior managing director of Toyota Asia Pacific Engineering and Manufacturing, said auto prices in the region were stable in the wake of CAFTA's implementation.

He denied that there had been collusion among auto firms to fix prices.

"Sales of vehicles imported from other Asean countries are still very small. Both Toyota and Honda earlier faced failures when importing some models from Indonesia for sale in the Thai market.

"Competition in the auto sector is intense, so we cannot overprice. The Commerce Ministry also has a database on our production costs. I could say that consumers are treated fairly," he said.

Suparat said Toyota currently imports Innova and Avanza models from Indonesia, but the sales volume of these multipurpose vehicles (MPVs) in Thailand is relatively small.

At this stage, consumer tastes in Asean markets remain diverse, with pickups widely popular in Thailand, sedans in Malaysia and MPVs in Indonesia.

"If we export pickups to Malaysia or Indonesia, sales will be low while the transport cost will be relatively high. When other costs such as after-sales expenses or spare parts inventory are included, the selling price will still be high despite the zero import tariff," he said.

Pitak Peukthisarikorn, executive director of Honda Automobile (Thailand), said the Kingdom is Honda's largest production base in Asean with an annual capacity of 240,000 vehicles, followed by its Indonesian plant, which has an annual capacity for 60,000 units.

"Honda in Thailand produces vehicles for most market segments. In Vietnam, we produce only the Civic and CR-V models but the volumes are smaller than those in Thailand, which also exports some models to markets outside Asean," he said.

At present, the Honda Fleet, a 1,500cc MPV, is the only model imported by Honda from Indonesia for sale in the Thai market under the zero-tariff scheme. Its price ranges from Bt890,000 to Bt1.07 million.

So far, a total of 11 brands have joined the zero-tariff scheme, including Toyota (Innova and Avanza models), Malaysia's Proton, Ford Focus (via the Philippines), Mazda (via the Philippines), Nissan and Kia.

Meanwhile, Prasartsilp On-atta, president of the auto-parts producers' association, warned that Vietnam, which will join the zero-tariff scheme in 2015, would become a formidable competitor for Thailand in the auto industry.

"Once Vietnam is fully integrated into Asean, it will be very attractive for foreign investment because of lower wages and abundant natural resources.

"Vietnam is also physically closer to Japan than Thailand, so transport costs for parts and components are lower. I think Vietnam will catch up with Thailand in this industry in the next decade," he said.

Regarding China, industry sources said the major Chinese auto firms had chosen Malaysia as the gateway to penetrate the vast Asean market largely because competition in Thailand is much fiercer and Japanese auto giants are already predominant.

Malaysia is being positioned as the production base for China' auto firms, so that its vehicles could enjoy zero tariffs when shipped to Thailand and other Asean markets.

"In fact, Chinese auto-makers wanted to tap the Thai market a long time ago, but it was not possible due to the strong Japanese brands here. Thai customers are also very selective in terms of quality.

"In addition, we have relatively high environmental and emission standards," he said.

Earlier, China Youngman Vehicle Group hired Proton of Malaysia to produce a passenger-car model with an annual output of 30,000 units for export to the Chinese market.

Using locally made parts and components, the vehicles can also be exported to other Asean markets under the zero-tariff scheme.

 

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Car Industry To Grow By 4.5 Per Cent This Year, Says Frost & Sullivan

January 14, 2010 15:06 PM

Car Industry To Grow By 4.5 Per Cent This Year, Says Frost & Sullivan

By: Ramjit

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KUALA LUMPUR, Jan 14 (Bernama) -- Malaysia's motor vehicle total industry volume (TIV) is expected to rebound strongly this year with a 4.5 per cent growth to a historic high of 555,000 units due to improved economic outlook and rising consumer sentiment, said Frost & Sullivan.

Its partner and head of the automotive and transportation practice for Asia Pacific, Kavan Mukhtyar, said the sales would also be driven by replacement car buyers amid low interest rates.

He said multi-purpose vehicles (MPVs) would be the fastest growth segment, increasing by 12.7 per cent year-on-year in 2010 to 68,000 units due to the intense competition among Proton Exora and Perodua Alza.

"Passenger cars will be the slowest growth segment at 3.2 per cent year-on-year due to lack of mass market models as well as some passenger car customers opting for entry-level MPVs.

"However, it will remain the biggest contributor to Malaysia's total vehicle sales accounting for about 75.3 per cent," he said at a media briefing here on Thursday.

Mukhtyar said demand for commercial vehicles was expected to increase five per cent year-on-year to 52,345 units, while 4x4 sports utility vehicles were likely to grow by 7.9 per cent year-on-year to 11,210 units.

He said in case interest rates rose substantially there could be a direct impact on vehicle sales.

"The other downside factors are global economic uncertainties, lower external demand and the impact of new fuel subsidy," he said.

Mukhtyar said there would be continued interest and development in electric vehicles and hybrids by car makers but demand was expected to be negligible this year.

"If the price of hybrid is almost equal to a regular car than the take-up could be high, but right now it is not possible.

"The market for hybrid cars will be substantial when the price difference is less than 10 per cent," he said.

He expected vehicle sales for 2009 to fall by 3.1 per cent compared with 2008 at 531,000 units versus an earlier forecast of 501,500 units.

"The better-than-expected TIV for 2009 was due to the government's stimulus package, scrapping incentive scheme for Proton and Perodua and continued strong sales of Perodua's Myvi, Viva and Proton Saga," he said.

Mukhtyar said the voluntary scrapping incentive has softened the downtrend in vehicle sales in 2009 as about 31,000 new vehicles were sold due to the incentive.

Although the scrapping incentives had ended, he said, the government may put such permanent "end-of-life" policy for vehicles amid commitments to reduce emission and use more environmentally-friendly products.

"It may not happen in 2010, but over the next five years such a policy will be put in place and consumers will be encouraged either directly or via higher taxes to replace their older vehicles," he said.

Last year, he said, Proton managed to increase its market share by 1.9 per cent due to sales from Exora in the MPV segment.

Perodua, however, continued to maintain its pole position in 2009 as Malaysia's leading carmaker with an estimated 33.4 per cent with Proton following closely behind at 30.4 per cent, he said.

"It will be an interesting competition between Alza and Exora as in terms of pricing and features both are equally attractive," he said, when asked whether Perodua would continue to hold its position as the market share leader.

He said both Proton and Perodua's market shares could be at par in 2010.

Mukhtyar said in the non-national car segment, Toyota's market share was likely to decline by four per cent to 13.6 per cent in 2009 due to intense competition in the MPV and entry-level mid-sized passenger car segment.

Meanwhile, Honda's market share grew by 1.6 percentage points to 8.1 per cent due to the new Honda City launch, he said.

-- BERNAMA

We provide (subscription-based)  news coverage in our Newswire service.

Lowest price car in Australia

The Proton S16 - earlybird pricing before Chinese onslaught.

>> SEE US IN ACTION: video road tests

IN a move designed to steal the thunder of cheap Chinese passenger cars, Proton has hit the market with its new S16 priced at $11,990 drive away.

This gives the Malaysian-built sedan the lowest price tag in the Australian new car market. It went on sale on December 1 in GX grade only with higher specification cars following next year.

The four-door sedan is powered by the same 1.6-litre, twin-cam engine in other Proton models. And far from being a bare bones model, the S16 GX scores plenty of kit including AM/FM/CD audio system, power steering, airconditioning, remote central locking with immobiliser and alarm, drivers SRS airbag and seating for five and five cup holders.

Proton is pitching S16 as an entry level car that will appeal to used car buyers. The company says S16 redefines the entry level new car. That could be right because it’s the only new four-door sedan available in Australia for less than $16,000 and will outpoint low-cost hatches and three-door models by offering a 1.6-litre engine and generous equipment levels.

Proton dealers have jumped at the opportunity provided by the S16 with orders going out for two months.

The company will use Miss Universe Australia 2009 winner Rachel Finch as “the face” of the new Proton S16.

Two 'family' car theft syndicates busted

PETALING JAYA: It was a family affair for two house break-in syndicates crippled by police in the Klang Valley last week.

The first syndicate was headed by two brothers and the other by a couple. Both syndicates are believed to have been operating since October last year.

Sources said the syndicates would not only break into houses and cart away jewellery and electrical appliances but also the vehicles parked in the porch.

The valuables were disposed of to buyers almost immediately after each break-in to avoid police detection while the vehicles were sold to individuals and car theft syndicates at very low prices.

It is learnt police, following a tip-off, had been monitoring the suspects' movements before closing in on them last week.

A police source said the first syndicate was busted at a budget hotel in Petaling Jaya at midnight by a Federal police Criminal Investigation Department team.

The syndicate was crippled with the arrest of the younger of two brothers running it and two gang members. The older brother escaped during the raid.

The bust was made less than five hours after the gang broke into a house in USJ-Subang Jaya and made off with electrical appliances, valuables and cash.

Police also seized two cars — a Proton Waja and a Honda Civic — which were stolen in Kajang and in USJ recently.

Checks on the suspects showed they had previous criminal records, including for house break-ins.

Police are now in the midst of tracking the complainants to assist in investigations into the break-ins.

Meanwhile, in an unrelated operation a few days later, police crippled another house break-in syndicate with the arrest of a couple at a fast food outlet in Damansara.

The couple led police to a house in Sentul where they seized electrical appliances and other valuables worth nearly RM20,000, a bunch of car keys and house break-in paraphernalia. Two people in the house were arrested.

No car seizures were made from the second syndicate, but police believe the stolen vehicles were disposed of to a third party soon after the break-ins.

It is not known how many cases exactly are linked to the two syndicates.

MOTOR INDUSTRY: Reinstate cash-for-clunkers

THE Proton Edar Dealers Association Malaysia (PEDA) is positive about this year's outlook despite its many challenges.

WALK THE TALK: Government needs to go the extra mile to help new car buyers — Filepic

Proton car sales will be affected this year by three government policies – spillover from the Second Financial Stimulus introduced last March; the revised National Automotive Policy announced last October; and Budget 2010.

This year will be tough without stimulus or direct policies to support Proton car sales despite the economy being not fully recovered.

However, PEDA is positive about car sales from support extended by Bank Negara and members of the
Association of Banks in Malaysia.

Since last July, PEDA has had discussions with both bodies on the approval and disbursement period for car hire-purchase loans, and to alert the authority of any increase in rejection percentage or discrimination on buyers' loan applications.

Proton’s car sales were badly hit in the first quarter of 2009 when the rejection rate for buyers was at an
alarming 70 per cent.

They improved after PEDA met with Bank Negara and the banks. Since then, car loan approval and  disbursement are made within 36 hours. Proton car sales has been positive and encouraging, despite the
recession. With continued support from Bank Negara and the banks, PEDA is confident that 2010 will be
a promising yet challenging year.

The Second Financial Stimulus helped to sustain car sales in 2009 despite the recession through a policy to scrap cars of 10 years or more with a RM5,000 voucher to buy a Proton car which attracted 32,000  applications.

However, funds for the scheme were exhausted by October, seven months after its launch, resulting in only about 15,000 applications being approved while the rest were given an alternative, less attractive offer, which led to a drop of 30 per cent in bookings, especially for Proton Saga.

On top of this, the RM5,000 vouchers for scrapped cars had only been partially disbursed by the government
to dealers, further exhausting the latter's working capital.

Momentum gained from the scrapping programme will be lost without any continuity, especially with Malaysia's relatively high average vehicle age. There are two ways that may positively affect the Proton ecosystem from the revised National Automotive Policy.

Firstly, the phasing out of imported used parts and components, including the half-cut, will strengthen the automotive ecosystem. Though cheaper, they come without warranty and many customers have been cheated when the parts they bought did not work easily.

However, the phasing out mechanism is still unknown. The discontinued mandatory annual inspection for vehicles of 15 years and above would have become a platform to ensure a minimum safety standard for Malaysia's relatively high average vehicle age.

The public may have changed or upgraded their cars once they were made aware of their vehicle's condition via the mandatory checks.

This in turn, would support new car sales. Steps can also be taken to do away with various charges from becoming a burden to the public, such as allowing insurance or finance companies to pay for car inspections which is in their best interest to protect their exposure.

In the UK, independent workshops can register with the authority to conduct inspections. In Malaysia,

Puspakom should not be made the only centre for inspection if mandatory checks are re-introduced.

PEDA urges the government to plough back some of the revenues collected from the automotive industry
into the system by re-introducing the car scrapping policy.

With RM5,000 per car collected through sales tax and excise duty, the government would get about RM750 million annually from Proton domestic car sales.

With an average total industry volume of 500,000 passenger car sales a year, the gross revenue contributed
by this sector is estimated at RM2.5billion (from sales tax and excise only assuming a RM5,000 average, excluding other indirect contributions).

Except for R&D grants, revenue collected is not ploughed back into the ecosystem to address our stagnant
and saturated market.

Malaysia registered almost the same number of passenger car sales in Thailand although our population
is four times smaller.

Our population is also smaller than Indonesia and the Philippines, but we registered higher sales than
both countries.

If we do not address this issue now, we will not be able to sustain our future sales.

Armin Baniaz Datuk Pahamin
President
Proton Edar Dealers Association Malaysia (PEDA)

FEEDER BUSES FOR THE LRT

After the Government announced that it was going to spend millions of ringgit on the extension of certain LRT lines, everybody is clamoring for the LRT to come to their places. It seems that everyone wants the LRT at his doorstep.

If you study the present set-up of the LRT, it is really not necessary to extend any line any more.

What is required now, and urgently, is to expand and improve the service of the FEEDER BUSES.

Take Subang Jaya for example. There should be a bus service for every Section.

It is not necessary to have the buses running through every street; but its route should be designed as such that no house is further than say 500 to 1,000 meters from the nearest Bus Stop. Thus, everybody can walk to the nearest Bus Stop, and in 15 minutes or so he will be on the LRT train.

The bus for each section should go straight to the Train Station.

The service should be such that any passenger/resident is able to travel from any Section to the Train Station not more than 15 minutes.

During the peak hours of 6-9 a.m and 5-7 p.m, the buses should pass every bus stop not longer than every 10 minutes.

In the long run, the introduction of the Feeder Bus Service will cost much, much less than extending the LRT lines.

The total cost for Feeder Bus Service is also than less than the cost of preparing car parks.

The Feeder Bus Service can be implemented immediately, or as soon as the buses are made available.

This same plan can be applied to Cheras to Maluri Station; Ampang to Ampang Station; Damansara Heights to Bangsar Station, and many others. Indeed every crowded resiential area can nbe covered by the feeder bus service.

If the Feeder Bus Service is fully implemented, then, we can stop all the bus services from residential areas to the city. For example, there should not be buses from Cheras or Subang Jaya to the City Center. By this, there will b ;less buses on the streets of Kuala Lumpur.

Sandy Parr

11.01.10

Proton moves closer to consolidating plants

Proton Holdings Bhd (5304) expects to complete a feasibility study on the consolidation of its car manufacturing plants by the end of the year.

The national carmaker has two plants in the country: in Shah Alam, Selangor, and Tanjung Malim in Perak. It is understood that the plan is to relocate the Shah Alam plant to Tanjung Malim where the facility occupies 518ha, five times larger than the former. The Shah Alam plant can produce 230,000 cars a year, while that in Tanjung Malim can make one million. Talk of consolidating the two plants first surfaced during the stewardship of Tan Sri Tengku Mahaleel Tengku Ariff, who was the chief executive officer until July 2005. On Proton’s latest offering, the Exora, chief executive officer Datuk Syed Zainal Abidin Syed Mohamad Tahir said it had secured 38,000 bookings and that 24,000 units were already on the road. Another 2,300 units have been sold in the Asean region, outside Malaysia. He was speaking at a press conference after launching Proton’s Family Day at the Shah Alam plant site last Saturday. The event was also attended by Proton adviser Tun Dr Mahathir Mohamad and chairman Datuk Mohd Nadzmi Salleh. The Exora is sold in three Asean markets apart from Malaysia, namely Singapore, Thailand and Indonesia. It is set to be launched in the Middle East in the second quarter of this year. Tun Mahathir, meanwhile, said that one of Proton’s achievements this year would be its participation in the Geneva Motor Show in March.“This signifies that we have come of age … It will be the first time that the Proton logo will be displayed in such a core show. We won’t tell you what car we will be showcasing,” Syed Zainal Abidin said.