South-east Asia is motoring

Despite the collapse of south-east Asia’s economy, one sector is benefiting automobiles. Most countries in the Pacific Rim region have established car manufacturing or assembly plants, or produce accessories and spare parts. And with the general fall in value of their currencies, these plants are now very low-cost and highly competitive producers. As a result, […]

Despite the collapse of south-east Asia’s economy, one sector is benefiting automobiles. Most countries in the Pacific Rim region have established car manufacturing or assembly plants, or produce accessories and spare parts. And with the general fall in value of their currencies, these plants are now very low-cost and highly competitive producers.

As a result, the region’s major car manufacturers are taking ever increasing advantage of these facilities. Japan is now sourcing an increasing proportion of car parts, and even complete cars, from south-east Asian subsidiaries. Daihatsu, for example, will double its stake to 40% in an Indonesian car parts joint venture, Astra International, to supply its companies in Japan and elsewhere.

Other companies are expanding their local subsidiaries. Mitsubishi is to manufacture its Asia car in Indonesia. To be launched this year, this car can be used as both a passenger and commercial vehicle, and is part of the company’s efforts to introduce cars designed for various Asian markets.

China still beckons Japanese car makers despite a slowdown in car sales; Honda is to open 100 vehicle sales outlets by 1 March 2002, the first 30 to coincide with the start of passenger car production in Guangzhou. Toyota is also going to produce and sell cars in China.

Members of trading bloc the Association of Southeast Asian Nations are also buying from each other: Malaysia’s second largest car maker Perusahaan Otomobil Kedua gets parts from Thailand.

Australian car maker Holden is working on designs for a very basic small car that would probably be built in Thailand to spearhead its expansion into Asia. Holden is designing the car for its US parent General Motors, and intends to market it as an Opel, exclusively in Asia.

Ford plans to return to the Philippines after an absence of almost 20 years. It is to open a new plant by the year end, and will buy $200m worth of locally-made components and parts annually. Ford’s Asian strategy also involves cross-shipping of products between nations which will enable the company to build cars even in countries with small markets.

But while this activity will assist economic recovery, a more liberal attitude to overseas investment in manufacturing will be necessary. Here the record is very erratic. Malaysia’s exit tax on foreign investment will do nothing to rid the country of its pariah-like investment status. Latest figures show that proposed overseas investment in manufacturing, which accounts for a third of GDP, fell 12% in 1998 to $3.3bn, on top of a 70% fall in domestic investment.

Ed Weiss