The Asean automotive market is dominated by Japanese brands, accounting for over 80 percent of the market share. The rest of the market in Asean comprises of American, Korean and European brands. The presence of Chinese and Indian original equipment manufacturers (OEMs) is, for the moment, marginal. This market composition has been the result of many years of sustained presence, localization and positive traction with various stakeholders by the Japanese manufacturers. It has also been supported by significant Japanese involvement in the overall economic development of the region. Asean has been a natural extension of the Japanese manufacturing footprint outside Japan from the perspective of sourcing and manufacturing, as well as sales.
Key challenges for the European automotive sector that have prevented them from gaining a larger foothold in markets in South East Asia include:
- High import duties and excise taxes;
- Numerous nontariff barriers to trade;
- Limited economies of scale in local production and purchasing; and
- Government incentive schemes that have been mainly geared toward entry-level segments.
Therefore, despite the rapid growth of the automotive market in Asean, the share of European automakers has been steady at around 1.5 percent. Most of the European sales are accounted for by BMW and Mercedes-Benz, which hold a dominant position in the “premium” segment. The Asean mass market is conspicuous by the absence of European models, usually priced out by cheaper locally produced Japanese brands, well supported by extensive dealer networks and aftermarket support.
In the coming years, European brands, such as Volkswagen, Audi, Renault, Peugeot and Citroen, are likely to increase their presence and share in the mass car market. For example, Volkswagen, which already has a small-scale local assembly in Malaysia, has recently won approval for a new assembly facility in Thailand and is reported to be looking at sites in both Indonesia and the Philippines. Renault is also being reported as looking at setting up a production facility in Asean. German carmakers and car-parts suppliers are demonstrating their Asean focus by visiting Thailand, Vietnam and Indonesia in May this year. The creation of production facilities is high on their agenda.
In the parts and components markets, European players have a well-established footprint with Bosch and Continental/Schaeffler playing a major role in both the OEM supply and the independent aftermarket. These component makers have not only invested in a strong manufacturing base across Asean, they have also established research and development centers. Increasingly, European suppliers are also looking at Asean as a global production hub—exporting parts and components from Asean to Europe’s major automotive factories. Putting in place further free-trade agreements (FTAs), such as the EU-Indonesia, EU-Philippines and eventually an EU-Asean FTA, would undoubtedly increase the potential for suppliers to export more from Asean to other global locations. However, moves also need to be made within Asean to remove differences in standards and testing regimes between intra-Asean markets to as to facilitate greater expansion of the supplier market in the region.
There is little doubt that the European automotive industry is a significant source of innovation and development of new technologies for the world industry. Some 60 percent of the patents granted in the automotive sector in 2014 have been granted to European companies. Expenditure in R&D in the automotive sector in Europe (both OEMs and parts suppliers) amounted to more than €41.5 billion (2013), significantly more than any other industrial sector in Europe and more than other major global automotive players. The advances being made by the European industry are most clearly prevalent in the environmental arena, where European cars have seen carbon-dioxide (CO2) emissions of automobiles and the environmental impact of the production of motor vehicles fall significantly in recent years. There is little doubt that the European industry is leading the way for the broader global industry in this sector. Across the EU, as a whole, the average CO2 emissions from new cars in 2014 was 123.4 grams per kilometer, a fall of 2.6 percent over the previous year, with some of the EU member-states recording falls in the range of 4 percent to 6 percent.
Given this background, it is trusted that the Philippine government opens the Comprehensive Automotive Resurgence Strategy program more constructively for European cars. Additionally, it is hoped that the EU and the Philippine government accelerate the FTA negotiations.