Asian Car Makers Eye Growth in Emerging Markets
Asian car makers will likely shift production and sales efforts to Southeast Asia and other emerging markets as demand from developed countries continues to fall in the next two to three years, global debt watcher Fitch Ratings yesterday said.
“We expect growth mainly from emerging markets. [Japanese and Korean carmakers] will shift to overseas. They will shut down in domestic markets but they will increase production capacity overseas,” Fitch Ratings Director Tatsuya Mizuno told a teleconference yesterday.
Car sales in the Philippines, for instance, bucked the worldwide downturn by growing 5.6% last year, industry data show. Industry and government estimates further show that sales will grow by 2-4% or flatten at worst this year.Growth is still expected because the financing environment is “relatively stable” in the Philippines, Chamber of Automotive Manufacturers of the Philippines, Inc. President Elizabeth H. Lee said in a telephone interview yesterday.
“Buyers and entrepreneurs are still able to take out loans. The entrepreneurship trend … overseas Filipino workers’ remittances are generating consumption [too],” Ms. Lee added.
As such, “there are no indications of plant closures” in the Philippines”.
But Japanese and Korean car makers will “not remain immune from the turmoil” as the downtrend in sales in the US and other developed markets will last for two to three years more, Mr. Mizuno said.
This will be largely caused by limited availability of credit and higher borrowing cost coupled with weak economic conditions, Mr. Mizuno and Jeong Min Pak — another Fitch Ratings director — said.
Toyota Motor Corp., Honda Motor Co., and Nissan Motor Co. are expected to record operating losses in the fiscal year ending in March 2009, Mr. Mizuno said.
Officials from the local units of these firms were not immediately available to comment.
Toyota Motor Philippines Corp. (TMPC) has said it would not be implementing production halts while Honda Cars Philippines Inc. said there would be no layoffs this year.
Korean firms Hyundai Motor Co. and Kia Motors Corp., meanwhile, will fare better as a weakening Korean won will make their prices attractive, Ms. Pak said.
Firms that offer a wide range of attractive vehicles for major markets, have an established brand, use advanced technology to address environmental concern, operate efficient production systems and have financial flexibility will come out bette, Mr. Mizuno said.
Locally, the Board of Investments has announced that it may offer incentives to the automotive industry to shore up sales and prevent retrenchments.
The auto parts industry is more downbeat.
“I don’t see a recovery in the next year or two,” Motor Vehicle Manufacturers Association of the Philippines Vice-President Ferdinand I. Raquelsantos said in a telephone interview yesterday.
This comes as imports of completely-built units which do not need local parts are increasing, Mr. Raquelsantos claimed.
“[Sales to] Thailand, Indonesia and Malaysia may be sustained but local part makers generally supply the local market,” he said.
Jessica Anne D. Hermos, Business World
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