The Outlook for Asia’s Automotive Industry

Prepared for
Trilateral Meeting 2006

By
Japan Auto Parts Industries Association
September 26, 2006
 Market Overview - Automobile Sales

Sales in 2005

(Unit:1,000)
Japan 5,852
China 5,762
Korea 1,142
ASEAN 1,885
India 1,440

Total Asia 16,528

World Total 58,910(’04)
( figure covers 42 countries)

Asia’s share 26.2%

(Source) FOURIN’s Monthly Report on the Global Automotive Industry, April 2006
 Market Overview - Automobile Production

Production in 2005

(Unit:1,000)
Japan 10,800
China 5,708
Korea 3,699
ASEAN 2,365
India 1,642

Total Asia 24,660

World Total 64,539(’04)
(figure covers 26 countries)

Asia’s share 38.2%

(Source) FOURIN’s Monthly Report on the Global Automotive Industry, May 2006
 Production,Trade and Domestic Sales

Year 2005 Unit:1,000

Country Production Export Import Domestic Sales

Japan 10,800 5,053 268 5,852
China 5,708 195 162 5,762
Korea 3,699 2,586 32 1,142
ASEAN 2,365 531 1,885
Thailand 1,125 464 703
Malaysia 563 47 551
Indonesia 622 10 534
Philippines 55 10 97

India 1,642 196 1,440

Taiwan 446 515
Total 24,660 16,528

(Source) FOURIN’s Monthly Report on the Global Automotive Industry, April 2006
 Automobile Production 1995 - 2004
Unit:1,000

1995 2000 2004

Changes
Country (1995=100)
PC CV Total PC CV Total PC CV Total

Japan 7,610 2,585 10,195 8,363 1,781 10,14 8,720 1,791 10,511 103
4
Korea 2,003 523 2,526 2,602 512 3,114 3,122 346 3,469 137
China 321 1,114 1,435 602 1,464 2,066 2,316 2,754 5,070 353
ASEAN 478 818 1,296 457 532 989 961 916 1,877 145
Thailand 117 365 482 97 315 412 299 629 928 193
Malaysia 249 57 306 295 64 359 365 107 472 154
Indonesia 39 347 387 184 108 293 257 165 422 109
Philippines 73 49 123 26 45 71 40 15 55 45
Taiwan 282 124 406 263 109 372 299 131 430 106
India 324 306 631 513 282 795 1,178 332 1,510 239

Note: PC=Passenger cars, CV=Commercial Vehicles

(Source) JAMA, FOURIN

 China -Big Emerging Market

Competition in China: Before and After the WTO

Brands and Share in 2000 Brands and Share in 2005

VW 15.7 %
VW 53 %
GM 9.5
FAW Xiali（一汽夏利） 14 Honda 8.2
Suzuki 8 Hyundai 7.5
Citroen 8 ⇒ Geely (吉利) 6.8
GM 5 FAW Xiali（一汽夏利） 6.1
Chery (奇瑞) 6.0
Honda 5
Nissan 5.3
Others 7 Toyota 4.6
PSA 4.5
Others 25.8

(Source) Automotive Resources Asia (ARA), Fourin

 China - Big Emerging Market (continued)

„ Only one company – Volkswagen– has more than 10 percent

market share.

„ China’s car customer base is shifting quickly to individuals, who

now account for more than 80 percent of new car sales.

„ Falling prices and rising incomes stimulate demands. Car sales

grew 25.8% percent to 3.1 million units in 2005. Total industry
sales reached to 5.7 million units.
 China - Big Emerging Market (continued)

„ China will become world’s 2nd largest market in 2006, surpassing

Japan.

„ Supply vs. demand gap continue to expand. Capacity utilization is

between 65 and 70 percent, e.g. total capacity has exceeded 8
million units while production remains 5.7 million in 2005.

„ Automakers will aim at exports as a release for their capacity and

help drive up volumes.

„ Exports has jumped up to 195,554 units (93,468 in 2004), while

import has decreased to 161,934 units(175,728 in 2004).
 China - Big Emerging Market (continued)
Foreign Transplants in Automotive Parts Sectors (1983 - Feb.2005)

Universal parts
Engine
Drive train
Interior
Brake
100% Foreign Equipment
1,576 J/V(50.1%) 1,576
(47.5%)
Material
Body parts

Nos. per Year Electrical equipments

1983-2005 Total

Total
J/V

©FOURIN
 China – changing rules and regulations

A battle over tariff on imports of auto parts

„ In April 2005, the central government put KD vehicle identification
rules in force, planning to extend the higher tariff rate to imports of
auto parts that cost 60% or more of the total price of a complete
vehicle.

„ The U.S.,EU and China have held talks at the WTO on China’s tariff
policy, but they failed to bridge the difference.

„ The General Administration of Customs recently posted a statement

on its web site, saying implementation will be postponed until July,
2008.
 ASEAN – market remains diverse and unique

„ The South East Asian markets, despite looking for unity under the
ASEAN Free Trade Agreement (AFTA), remain very much diverse and
unique.

„ Thailand is ASEAN’s largest producer with 1,125,316 units and region’s

largest exporter with 464,250 units.

„ In Malaysia, national carmaker Proton has slashed its share from

63.4% in 2001 to 41.4% in 2005 due to low trade-in value. With its
National Automotive Policy (NAP) announced in March 2006,
competition will get tougher for Proton.
 ASEAN market (continued)
„ Indonesia , the largest passenger vehicle importer (44,326 units in
2005) lags behind Thailand and Malaysia with its size of
production and sales.

„ The Philippines remains the country with the least developed

automobile and automotive industries among ASEAN 4. Size of the
industry and market are still small.
 ASEAN market (continued)

„ Intra-ASEAN trade among parts suppliers are expected to boost up,

as Malaysia accepted CEPT (Common Effective Preferential Tariff).
Import duty on CBU within AFTA was reduced to 5% (20% →５％）
effective from March 23, 2006.

„ Free Trade Agreements between member countries and their trade

partners outside ASEAN are another positive factors for the further
development of auto and automotive industries.
 India – a market with a big potential

„ Indian Auto Industry;

Largest Three Wheeler Market in the World

2nd Largest Two Wheeler Market in the World

4th Largest Passenger Vehicle Market in Asia

5th Largest Commercial Vehicle Market in the World

India –a big potential (continued)
„ Deregulation started in 1991

1991 Permission of foreign ownership (up to 51%) for auto

industry, except passenger car

1993 Further liberalization on automobile production by

foreign capitals.
Since then, 16 foreign carmakers have invested.

2001 Reduction of sales tax for passenger cars & MPVs

(32→24%）, Import duty for CKD (30→25%).
 India –a big potential (continued)

„ Major Players (share in %) and Production in 2005

Maruti Udoyog (33%) 555 (in 1,000 units)

Tata Motors (26%) 427
Hyundai Motor (15%) 250
Mahindra & Mahindra (8%) 129
Toyota Kirloskar (2.8%) 45
Honda Siel Cars (2.3%) 39
GM India (1.8%) 29
Ford India(1.4%) 23
 India –new automobile plants
Brand Location Year Remarks
Maruti Udoyog Hariana 2006 The 2nd assembly plant will start from the
end of 2006 (100,000units)

Hyundai Chennai 2007 The 2nd assembly plant will be completed in

June, 2007 (150,000units)

Toyota Bangalore 2005 Started new model “ IMV ” with initial

production 40,000 units, 100,000 in 2010

Honda Delhi 2005 Capacity expansion from 30,000 to 50,000

units, up to 100,000 by 2010

GM Pune 2007 Targeting the end of 2007 to begin

production of small cars (140,000 units)
 India –FTA will help further development
„ Free Trade Agreement

FTA with Thailand (Framework agreement enacted in Sep.04) have

benefited Indian carmakers with a lower cost parts from Thailand.

„ Japan will start negotiation soon.

Transplants by JAPIA Member Companies

China
294

Philippines
India Thailand 43
55 186

Ｍａｌａｙｓｉａ
Indonesia
34
84
Transplants in China

Tianjin
４５

Jiangsu
４３

Shanghai
Guangdong
33
７５
 Conclusion

„ With saturated market, hi-cost countries cannot expect much growth;

thus, competition gets even tougher.

„ OEMs manufacture products where they sell. China has been

highlighted with its sharp expansion of local market. Oil price hike is
one of the uncertain factors marketing in China.

„ Alliance with other suppliers may help OE suppliers be more

competitive. They are shifting production to ASEAN.

„ For ASEAN suppliers, China and India could be threat coming into
region.
The 10th Trilateral Meeting 2006

Thank you