The region’s car industry has boomed in recent years as the newly affluent middle classes snapped up vehicles that have clogged the streets of capitals from Bangkok to New Delhi. But the threat of recession, together with plummeting consumer confidence and the global credit crunch, which has made it difficult to obtain new vehicle loans, has seen gloomy forecasts posted for this year.
“The industry is in crisis mode across the world,” said Ashvin Chotai, managing director of Intelligence Automotive Asia. “I’m expecting about an 11.8 per cent decline in 2009 in all Asia for light vehicle sales. That is an incredible decline, probably on a scale worse than the sort seen during the Asian crisis,” he added.
Ashvin said that during the 1997-98 regional financial meltdown, China and India – which are now huge car markets – were not substantially affected. “But this year, there’s hardly any country in the world that’s going to grow in auto sales.” While domestic sales are down right across the region, the major exporting nations will bear a double burden. “The maximum impact will be on Japan and South Korea because they export a large number of cars to the US and Europe,” said Vivek Vaidya, automotive analyst at consulting firm Frost and Sullivan.
Japan’s production plunged a record 25.2 per cent in December, the steepest decline since records began in 1967. New vehicle sales slumped to the lowest level in three decades last year with a 6.5 per cent drop to 3.2 million units. “It is a very serious situation,” said Takeshi Fushimi, director of the Japan Automobile Dealers Association. “In the throes of a kind of economic slump that occurs once in a century, consumers’ sentiment has rapidly cooled.” The association predicted domestic sales would keep slipping, with a 2009 target of slightly more than three million units, as young people continue to shun cars due to low wages, high fuel costs and good public transport. Japanese carmakers went into the crisis in better shape than their US rivals, but have nevertheless been forced to slash output.
Toyota overtook General Motors to become the world’s top automaker last year, but only because the Detroit giant’s sales fell faster than its own. It has forecast its first-ever operating loss for the financial year to March. In South Korea, domestic sales fell 5.3 per cent last year and exports were down 5.7 per cent. For this year, the Korea Automobile Manufacturers’ Association expects exports to fall 5.6 per cent and domestic sales to drop 8.7 per cent. To offset the decline, automakers have cut production, delayed new investment to secure cash reserves and launched cost-saving drives. In December, they shut down factories for up to three weeks to reduce invento-ries. Chinese-owned Ssangyong Motor applied for receivership to avoid bankruptcy and closed its plant indefinitely. Australia is braced for a 13 per cent dec-line in new vehicle sales this year, after a 3.6 per cent drop last year.
Local manufacturers were worst hit, with sales down 14.5 per cent to their lowest level since 1980. As layoffs mounted, the government last November announced a stimulus package aimed at making the industry more econo-mically and environmentally sustainable. “I don’t believe that car-making is yesterday’s business or something better left to the Germans or Japanese,” said Prime Minister Kevin Rudd at the time, insisting that “we believe this industry has a future.” Indian car sales posted their biggest annual fall in eight years in November, highlighting the downturn in Asia’s third-biggest economy which has seen automakers race to cut prices to lure buyers.
“This year there will be a decline in sales, fiscal ’09 has been a bad year,” said a Mumbai auto analyst. In Malaysia, Southeast Asia’s biggest passenger car market and home to the Proton national car, vehicle sales are tipped to fall 12.4 per cent in 2009 after 12.5 per cent growth in 2008. In Thailand, domestic auto sales are expected to dip more than 15 per cent in 2009 while exports could slump by 26.6 per cent. Toyota, Honda and General Motors have factories in the kingdom, and the industry accounts for about 16 per cent of gross domestic product. Despite the gloom, the worst of the fallout is expected to be over by the end of the year, when the players who have survived the crisis can expect to begin a modest recovery. – AFP
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