ASEAN's vehicle sector faces tough drive amid global, coronavirus woes

ASEAN's vehicle sector faces a tough drive in 2020 as global market uncertainty stunts demand, while the COVID-19 outbreak adds further doubt amid consolidation efforts by global carmakers.

The challenges come after ASEAN's 2019 vehicle production fell 4.8% year on year to settle at 4.16 million units, data from the Asean Automotive Federation showed, its first decline since 2015 when output dipped 2% from 2014.

The decline in 2019 saw the region's two biggest car producers, namely Indonesia and Thailand, posting falls in their annual output, which comprise both passenger and commercial vehicles.

Against 2018, Indonesia saw its 2019 production fall 4% to 1.34 million units, while Thailand experienced a 7% drop to 2.01 million units.

COVID-19 could pose a challenge for Indonesia's automotive industry, the Association of Indonesia Automotive Industries, or Gaikindo, said. The association had checked the components of imported vehicles from China, which could have an impact on the national automotive industry.

Under an Indonesian government steel industry development roadmap, over 2020 to 2024, the domestic industry is projected to produce special steels for the automotive, defence and health industries. Currently, the automotive sector accounts for about 8% of Indonesia's annual steel consumption.

PT Krakatau Nippon Steel Sumikin, a joint venture between Japan's Nippon Steel and PT Krakatau Steel, makes cold-rolled steel, hot-dip galvanized steel and galvannealed steel products for automotive use. The venture, which began commercial operations in July 2017, has a production capacity of about 480,000 mt/year.

Toyota Motors Thailand expects overall domestic car sales to drop 6.7% to 940,000 units in 2020, as the market faces challenges from a shrinking global economy, tightened loan conditions by local banks and lower consumer confidence.

"This year is going to be another challenging year for Thailand's overall automotive industry," Michinobu Sugata, president of Toyota Motor Thailand, said, citing "decreasing level of consumer confidence and private consumption, tightening car-loan scheme, and continued uncertainty of the global economic trends."

GLOBAL CARMAKERS ADJUST PRESENCE IN ASEAN

Amid the slowdown, US carmaker General Motors plans to sell its Thai plant in Rayong to China's Great Wall Motor Co. by the end of 2020.

"The acquisition of GM's Thai Rayong plant will help the business development of Great Wall Motors in Thailand and the ASEAN market. Great Wall Motors will expand through the entire ASEAN region with Thailand as the center, and export its products to other ASEAN countries as well as Australia," Liu Xiangshang, vice president of GWM's global strategy said.

Ahead of GM's pullout, Japan's Honda Motor will cease vehicle production at its Philippine plant in Santa Rosa, Laguna, in March 2020. The plant is operated by its subsidiary, Honda Cars Philippines Inc., or HCPI.

"The closure of the Honda car production facility...was mainly triggered by the global slowdown caused by the US-China trade war, followed by the current COVID-19 issue," the Philippines' Department of Trade and Industry said citing its secretary Ramon Lopez.

"HCPI has been facing challenges in keeping cost competitiveness, producing only 8,000 units per year of the City and BR-V models, as compared to Honda Thailand producing over 200,000 units annually," the DTI said.

In Indonesia, South Korea's Hyundai Motor plans to invest about $1.55 billion until 2030 to build a car plant in Indonesia, which will be its first in Southeast Asia.

Hyundai's plant will be located at Bekasi, east of Jakarta, and will start production in late 2021 with an initial production capacity of about 150,000 units/year, growing to an eventual 250,000 units/year.

In spite of the automotive slowdown, Malaysia announced its National Automotive Policy 2020 on February 21, which will span 2020 until 2030. Under NAP 2020, Malaysia aims to more than double its overall vehicle production to 1.47 million units/year by 2030, the Ministry of International Trade and Industry said.

In 2019, Malaysia produced 571,632 passenger and commercial vehicles, up by about 1% from 564,971 units the year before, data from the Malaysian Automotive Association showed, which makes the country the third largest car maker in ASEAN, after Thailand and Indonesia.

The goals include the development of next-generation vehicles and associated technologies such as "light weight material technology as well as hybrid, electric and fuel cell vehicles."

Upon achieving its goals, NAP 2020 is expected to bring the automotive sector's contribution to Malaysia's gross domestic product to MR104.2 billion ($24.7 billion). Currently, the automotive sector contributes about 4% to Malaysia's GDP, or MR40 billion, the ministry said.

But for the current year, the Malaysian Automotive Association foresees "2020 will be another challenging year...The global economy growth is expected to remain subdued. Despite some progress in the recent trade deal between US and China, and a resolution of the Brexit impasse...many analysts believe the worries over trade war and geopolitical risks are likely to remain in 2020."