AFTA: The upcoming challenges to the Malaysian automotive industry

ASEAN AUTOMOTIVE MARKET
ASEAN is a key strategic automotive market. There are many reasons for these. ASEAN population is 510million. Young population is the major share from this figure. Currently the car sales in this region have been increasing every year. For the year 1998 the sales was 500,000 vehicles. In 1999 car sales was 740,000 vehicles. For this year the sales is projected to reach 1 million vehicles and 1.5million in the year 2003. The leading supplier for the whole ASEAN region is Proton. It has 22% of the market. This is mainly due to its monopoly in the Malaysian market. Toyota is second in the list with 20% share. According to Mr. Jerry Kania of Ford Motor Company, if look closely to the ASEAN market we will find out that the integrated sales of this region could be fifth largest in the world by the year 2005.

Another reason is the growing economic growth of the ASEAN countries. The GDP growth was effected in the year 1998 because of the economic problem. However the ASEAN countries have recovered sooner than expected. For the past ten the GDP growth for the ASEAN countries was above the average value of world GDP growth. This is expected to continue for another ten years. ASEAN economic growth is one of the highest compare to other countries and this makes it more attractive than other countries. Raw material are available a lot in this ASEAN region. ASEAN is the largest producer of natural rubber, tin, crude palm oil and cocoa. These are an attractive consideration for channeling foreign direct investment (FDI) into ASEAN and setting up a regional headquarter.

Since the market is very attractive, many foreign giants from Japan and US have already invested in this region. From 1995-1999, US giants like Ford, General Motors Daimler Chrysler have invested US$1.6 billion dollars in the ASEAN region. 75 percent of this have been invested in Thailand. General motors itself have invested 750 million in Thailand to open up a base. Their investment for other ASEAN countries is low. This is because the flexibility and trade regulation that is no so tight in Thailand compares to other ASEAN countries. So Thailand has been pointed out as a strategic base for investment in this region. A few more giants like Volvo are already negotiating with local Thailand companies to open a base in Thailand.