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Mr. Dushyant Sinha, Principal Consultant, Automotive & Transportation Practice Asia Pacific at Frost & Sullivan said that smaller Japanese players such as Suzuki, Mitsubishi and Isuzu and new entrants will gain the most from the implementation of AEC, as the level playing field will make it easier to expand their presence and challenge incumbents.
"However, big Japanese OEMs are still likely to continue to lead the market," he added.
New analysis from Frost & Sullivan (automotive.frost.com) Strategic Growth Opportunities from AEC Implementation and New Government Policies in ASEAN finds that market realities and existential threat perceptions are the biggest drivers for AEC integration.
However, Dushyant said that given the sheer scope and complexities of various outstanding issues, there is a strong likelihood that closer to 2015 some of the elements of AEC will be put on hold.
He noted that Indonesia, Thailand and Malaysia are the key automotive markets in ASEAN, accounting for 89 per cent of the passenger car market. "However, at the global level, Indonesia, Thailand and Malaysia do not figure amongst the top-15 passenger car markets," he added.
He said that the BRIC countries are much bigger than the key ASEAN markets in terms of industry volume, and compete aggressively for investment in the automotive sector.
He added that as one market, ASEAN is currently at the cusp of a high growth phase, along with the BRIC markets.
"The low level of motorization in ASEAN indicates a strong growth potential, while the heavily motorized markets of Western Europe and North America represent a saturated replacement market," Dushyant said.
He added that the BRIC markets, led by China and India are the largest competitors for ASEAN in terms of market and investment. Their attractiveness stems from their larger market size and larger economies. As an integrated market, ASEAN will be more competitive and a better match to the BRIC economies, he added.
"Smaller markets, with their individual automotive sectors, will continue to be plagued with issues of productivity and efficiency. Sector integration will lend economies of scale which in turn will help reduce costs and improve competitiveness," he added.
Dushyant also said that the capital intensive nature of the automotive sector, coupled with the ever increasing competitive pressures, pushes for increased investment, both technical as well as financial, for the local industry to remain competitive and globally relevant.
He added that an integrated automotive sector will enhance ASEAN's attractiveness as an investment destination and help the local players, plagued with limited resources, to survive.
However, Dushyant said that political compulsions, accentuated by development divide serve as key restraints for the implementation of AEC.
He also said that local OEMs will find it challenging to maintain their existing market positions and some degree of consolidation is expected.
He added that automotive OEMs and suppliers should focus on increasing value and reducing cost of safety systems.
Dushyant said that within the automotive value chain, suppliers as a whole are better "hedged" to weather the impact of AEC due to their multi-client share of OE business and opportunities in the aftermarket segment.
He said that under the full implementation of the AEC, a structural change is likely in the automotive sector. "Local players, both OEMs and suppliers, stand to lose the most. Overall, market concentration is set to decrease," he added.
If you are interested in more information on this study, please send an email to Alice Chia, Corporate Communications Asia Pacific, at alice.chia[.]frost.com, with your full name, company name, title, telephone number, company email address, company website, city, state and country.
Strategic Growth Opportunities from AEC Implementation and New Government Policies in ASEAN / P6DB-18
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