Industry Focus >>Overview ofAutomotiveandComponents
Productionand Sales in
ASEAN

complete vehicle manufacturing and assembly. Global major car manufacturers have
set up assembly factories in ASEAN and have begun to take shape due to sufficientlabor, low wages, inexpensive land prices, and potentials for the development of theauto industry and market, etc. The auto industry in ASEAN is mainly concentrated inMalaysia, Indonesia, the Philippines, and Thailand. Indonesia, Thailand, Malaysia, thePhilippines, Singapore, Vietnam and other ASEAN countries have terminated tariffs on
auto imports and exempted auto parts from luxury tax.

新興市場商機東協主要國家汽車與零組件產銷概況
1. Auto Production& Sales in ASEANShow GrowthHardware & Fastener Components - no.61/2024

ASEAN consisting of 10 countries has anarea of 4.44 million sq. km, a populationof 620 million, and a GDP of over US$3.2
trillion in 2022, making it an emerging
regional organization with considerable
inf luence. Among ASEAN 10, Thailand,
the Philippines, and Indonesia are open
countries in the auto industry, and Indonesia
in particular has replaced Thailand to be thelargest auto market in ASEAN. However,Thailand is a country with less government
inter vention and protection for the autoindustry. Thailand, having opened up itsmarket, has established technical cooperationor production relationships with other int’lautomakers, and is already ahead of other
ASEAN countries in terms of manufacturing
integration and cost competitiveness.

Compared to Thailand, Malaysia is acountry protecting its auto industry.
Malaysian government is committed to thedevelopment of the local auto industry andis more deeply involved in it, which in turnfaces the greatest pressure to reduce tariffs
or protective measures and is more resistant
to liberalization issues. The main reason
that Malaysian government chose to adopt a
protective policy for the auto industry is dueto the country’s special political and economic
background and industrial environment.

M

ajor ASEAN countries have laid thefoundation for auto parts manufacturing
and assembly and have the capability of096 惠達雜誌In densely populated countries such as Thailand, Indonesia, Vietnam, and thePhilippines, the ratio of car ownership per capita (the numbers of cars per 1,000
people in 2022 were 245.8 in Thailand, 91.3 in Indonesia, 17.3 in Vietnam, and 35.8 inthe Philippines) is relatively low compared to those of advanced countries, and the future
auto parts and components business opportunities have great potential for development,
both in the AM and OEM market. Japanese automakers such as Toyota, Suzuki, andDaihatsu are optimistic about the development potential of ASEAN and are actively
adjusting ASEAN to become the production bases of Completely Built Unit (CBU),and are placing their business in the ASEAN and emerging countries with Small MultiPurpose Vehicles (MPVs). In comparison with the BRIC countries, vehicle ownership in
ASEAN is still on the low side, and most of the citizens still use motorcycles as a meansof transportation. In recent years, with the development of the economy and changes
in consumer behavior, which has led to an increase in the demand for low-priced smallcars, ASEAN will become an important competitive arena for major auto manufacturers
in the future in terms of the global market and development trend.
Fig. 1 shows the forecast of ASEAN auto production and sales. In 2022, ASEAN
auto production was 4.384 million units, an increase of 23.9% from 2021, due to theincrease in production in Thailand and Indonesia. In 2023, the boom continued, withthe production of 4.417 million units, an increase of 3.0% from 2022, and the sales were
estimated to be 3.838 million units in 2023, an increase of 12.1% from 2022. Fig. 2 isthe forecast of auto sales in major ASEAN countries. In 2022, ASEAN auto sales were3.425 million units, a 22.7% increase from 2021, mainly due to the increase in domestic
demand in Indonesia and the Philippines, resulting in sales growth, with the largest auto
market in ASEAN (1.048 million units sold to Indonesia, 849,000 units sold to Thailand,and 721,000 units sold to Malaysia.)
Fig. 1

Industry Focus >>Fig. 2YEAR

2. Indonesia — Domestic
Demand is Obvious; Importsof Auto Parts are Larger Than
Exports

I

ndonesia’s auto production scale used to be the largest inASEAN, with an early start and supported by the domestic
demand, giving it an advantage over other ASEAN countries interms of industry development. Indonesia has the potential of thedomestic demand market and natural resources, coupled with theimplementation of the ASEAN Free Trade Area (AFTA), which
has eliminated the 5% tariffs on autos and auto parts between the6 ASEAN founding member countries (i.e., Thailand, Malaysia,Singapore, Brunei, the Philippines, and Indonesia), making it easyfor autos and auto parts to be exported from Indonesia to the ASEAN
countries, and with a competitive edge in terms of cost.

I

ndone sia n gover n ment ha s l i st e d aut o a s sembly
manufacturing as a key development industry and will
actively promote the development of the auto industry in thenext 5 years in the hope of replacing Thailand as the largest
auto assembly production base in Southeast Asia. In 2011, theflooding in Thailand resulted in the dislocation of the auto parts
supply chain and an imbalance between supply and demand,and major auto manufacturers realizing the concentrationof production bases in a single place (Thailand) have been
seeking a 2nd or 3rd production location. Indonesia has a large
domestic market and natural resources, and coupled with
the implementation of ASEAN countries’ free trade zones,
Indonesia is looking forward to obtaining the opportunities tobecome the regional production center of auto assemblies andcomponents in ASEAN.

Due to new vehicle models being put into production andthe expansion of the domestic market, the demand for
locally produced auto parts in Indonesia has become larger
and major auto and auto parts manufacturers have continued
to strengthen their investment and plant establishment inIndonesia. The components required for auto assembly inIndonesia are mainly imported in the form of semi-bulk parts,
such as auto electronics, gearboxes, chassis, engine systems,steering mechanisms & systems, drive shaft components,
brakes and suspension systems and other components, allof which are imported. Fig. 3 shows the sales value of autoparts in Indonesia. The sales values of Indonesia’s auto parts(HS: 8708, other auto parts) was US$8.65 billion in 2022, anincrease of 11.7% from 2021.
Fig. 4 shows the import and export values of Indonesia’s
auto parts. In 2022, the export value of Indonesia’s auto parts
was US$2.89 billion, an increase of 2.3% from 2021.

Fig. 3Fig. 4

Fig. 5 shows the major import origins and their share in Indonesia’s total auto parts import in 2022. Most auto parts of Indonesia wereimported from Japanese manufacturers, and the major import origins were Japan (41.0%), Thailand (35.8%), China (5.1%), Germany (4.4%),
and Malaysia (3.5%), with the top 5 countries accounting for 89.8% of the total imported auto parts. Fig. 6 shows the major destinations ofIndonesia’s auto parts export in 2022, and the major export destinations were Thailand (24.6%), Japan (13.7%), Malaysia (13.4%), Brazil(5.8%), and India (5.7%), with the top 5 export destinations accounting for 63.2% of the total exported auto parts.

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Hardware & Fastener Components - no61/2024

Due to the lack of a complete supply chain in Indonesia’s auto parts industry, most semi-finished components and engine
systems, automatic transmissions and other key components rely on imports, characterized by a market in which the valueof imports exceeds the value of exports. In 2022, the import value of auto parts in Indonesia was USD 5.67 billion. In 2023, it wasforecasted that the import value would be USD 5.81 billion, a growth of 2.4% from 2022 due to the factors of political and economic
stabilization in Indonesia and the increase in auto ownership.

097

Industry Focus >>Fig. 5

3. Thailand — The 2nd Production Baseof Japanese Car Manufacturers andComponents

IFig. 6n order to strengthen the development of the local industry and achieve
the economic scale of production, Thailand restricts the types of domestic
assembled vehicles, further enhances the nationalization and promotes thedevelopment of the component industry, and establishes The Thai Auto-Parts
Manufacturers Association (TAPMA) as a national unification mechanism toprovide the component industry with a mechanism for industry integration anddevelopment. Thailand announced a ban on “complete vehicle imports” andan increase in the tariff on “components imported to assemble” as a means ofprotecting the domestic auto industry. The number of local Thai component
manufacturers has grown year after year under the government’s dual policyof ceasing to grant production privileges and increasing the proportion oflocally-produced components.

After Thailand’s accession to WTO, the restriction on the place of origin of autoparts must be abolished, allowing multinational enterprises to set up whollyowned enterprises. As a result of the liberalization, the auto assembly has been led
by foreign investors, while the local manufacturers have turned into the supply chainof components, forming a system with a division of labor in the industry. In addition,
the regional integration of AFTA has accelerated the liberalization of the automotiveindustry. According to AFTA regulations, the import tariffs and non-tariffs ofexisting ASEAN member countries (Brunei, Indonesia, Malaysia, Philippines,
Singapore and Thailand) have been lowered to 0-5%.

Hardware & Fastener Components - no.61/2024

Thailand’s Board of Investment (BOI) has listed
the auto industry as one of the “Top 5 Industries
for Investment Promotion” and has taken incentives toattract more multinational auto manufacturers to set
up factories in Thailand. Under the ASEAN Industrial
Cooperation Scheme (AICO), auto parts can enjoy tariffs
of 0-5% in the ASEAN region, and tariffs on imports
into Thailand have been reduced to 5%, provided
they meet the 40% origin criteria. Autos have become
Thailand’s 5th largest export items, and its auto export
ranked 1st among ASEAN and ranked 3rd in Asia, onlyafter Japan and S. Korea. Thailand not only has become
the ASEAN’s largest auto assembly base, but also theworld’s top 10 car manufacturing countries. There are 16
auto assembly factories and 1,800 parts manufacturersin Thailand. Its industry focuses on development ofpick-up trucks, and the output is only second to theU.S., which is a major factor that has contributed to thedevelopment of the auto parts industry.
Fig. 7 is the forecast of Thai auto parts market. In
2022 Thai auto parts sales value was 16.94 billion USD.
It was predicted that in 2023 Thai domestic auto parts
would be still in strong demand, with the sales valueof 18.39 billion USD, an increase of 8.6% over theprevious year. Fig. 8 is the forecast of Thai import andexport values of auto parts, showing that the value ofexports exceeds the value of imports. As Thailand is
the main overseas production base of Japanese vehicle
manufacturers, the injection of resources is relatively
more and the main key components (such as engines andgearboxes) are mostly imported from Japan.

098 惠達雜誌Fig. 7Fig. 8Fig. 9 shows the major import origins and their share in Thailand’s total autoparts import in 2022. Most exporters were Japanese manufacturers and the major
import origins were Japan (49%), China (24.9%), Germany (7.5%), the U.S.
(2.3%), and Indonesia (2.2%), with the top 5 countries accounting for 85.9% ofIndustry Focus >>the total imported auto parts. Fig. 10 shows the major export
destinations of Thai auto parts (HS8708) and their share in2022. Major export destinations were Japan (11.2%), Indonesia(10.0%), Malaysia (9.2%), China (7.9%), and the U.S. (7.2%),
with the top 5 export destinations accounting for 45.5% of thetotal exported auto parts.
Fig. 9Fig. 12 shows the import and export values of Malaysian auto parts,
with US$2.72 billion import and US$910 million export in 2022. Morethan 70% of Malaysian auto parts are supplied to the OES, and mostof the exported auto parts belong to the lower technology level, suchas body panels, bumpers, brake pad components, or exhaust (pipe)
systems, while high value-added key components (such as engine
systems, automatic transmission, etc.) are imported, making Malaysia
an ASEAN country whose import value of auto parts is larger than thevalue of its export value.
Fig. 11

Fig. 10

4. Malaysia — Governmentled Development ofDomestic Vehicle Industry

M

alaysia is committed to the development of thenational car industry. Its cars have been domesticallyprocessed in terms of design, large-scale production, andintegrated production of components. There are currently
four domestic car manufacturers, namely Proton, Perodua,
Inokom, and MTB, of which the first two are developing
passenger cars. In order to face increasingly fierce int’lcompetition, declining proportion of domestic vehicles in
the market, and maintain its advantage in domestic vehicles,
Malaysia is actively developing into an auto assemblyand production center of ASEAN. Most of the auto parts
produced in Malaysia are made from raw materials that canbe obtained domestically, and the technological level of thecomponents is relatively low, labor-intensive and less valueadded or highly polluting components, such as tires, forging,casting, stamping, and other manufacturing industries. Fig.
11 shows the sales values of auto parts in Malaysia, withthe sales value in 2022 being US$4.13 billion, an increase of
12.3% from 2021.

Fig. 13 shows the major import origins and their share in Malaysia’s
total auto parts import in 2022, which were Thailand (34.9%), Japan(23.3%), China (12.7%), Germany (12.3%), and Indonesia (7.4%),
accounting for 90.6% of the total. Fig. 14 shows Malaysia’s auto parts
major export destinations and their shares. The top 5 export destinations
were Thailand (10.9%), Indonesia (9.4%), Singapore (9.3%), Japan (8.1%),
China (6.7%), accounting for 44.4% of the total.
Fig. 13

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Hardware & Fastener Components - no61/2024

Fig. 12099

Industry Focus >>Fig. 14

5. Conclusions and Suggestions

F

acing diversified demand for low-cost autos, small cars, and new energy
vehicles in ASEAN such as Indonesia, manufacturers are advised to get ridof the habit of copying auto parts, enter the supply chain system of auto partsOEMs, utilize Taiwan’s ICT technological advantages to develop innovative
products with price differentiation (e.g., automatic transmission and drive
mechanism, GPS, car recorder, car game and entertainment system, driver safetyassistance system, and other high value-added products), and proactively lay out
the auto parts market in Indonesia as early as possible, in addition to maintaining
their original competitive advantages in AM and the global supply market.

Thai BOI provides support and incentives for industrial clusters in 7 provinces,incl. human resources, technology development, infrastructure development
and logistics systems, tax and non-tax incentives, and financial and regulatory changes, to promote foreign investment. Thailand’s key autoparts raw materials are mostly supplied by Japan; however, labor shortages and high production costs and other factors in Japan have resulted
in high cost of raw materials and manufacturing. Taiwanese and Japanese manufacturers (incl. auto and auto parts manufacturers) have kept
close relations for long, so Taiwan’s R&D and technological capabilities may bring more component substitution or OEM opportunities.

Taiwan’s auto parts manufacturers should follow the local government’s policy on the auto industry and carefully select partners tomatch the direction of the government’s consolidation of domestic assembly capacity, for example, by choosing to cooperate withexisting assembly or overcapacity companies, especially those with a government background, to improve the quality of components inorder to obtain the support of the government; and, secondly, by adopting a flexible and diversified approach to cooperation, which caninitially be adopted by exporting parts for assembly to Malaysia, and then selling them under the current Malaysian domestic vehicle
brands, or by assembly of bulk components in Malaysia, and then reselling them under their own brands in Malaysia and to ASEAN.

Data source: ASEAN Automotive Federation; Global Trade Atlas; ITRI IEKHardware & Fastener Components - no.61/2024

Copyright owned by Fastener World / Article by James Hsiao

100惠達雜誌