It’s not exactly a secret that Japanese car dominate the market in South East Asian countries, from Burma to the most eastern tips of Indonesia, Japanese brands rule the roads. But Chinese brands are begining to enter the market, SAIC recently set up shop in Japan’s second Asian backyard in Thailand where Honda, Toyota and Nissan regularly produce vehicles for export to the UK. So strong is Japan’s grip on the Thai market that they control a staggering 88.6% of the market through Toyota, Honda, Mazda, Nissan and even Isuzu.
With the introduction of a China-ASEAN Free Trade Area it seems that Chinese manufacturers are ready to enter the South Asian market with gusto, but Chinese manufacturers should be wary before rushing to invest according to Mr. Yeap Swee Chuan, chairman, CEO and president of Thailand’s AAPICO Hi-tech Co, a Malaysia company that specializes in automotive parts. Yeap remarked yesterday at the 2013 Global Automotive Forum during a session on Chinese Investment in the ASEAN markets that the Thai market is notably difficult to enter and requires huge investment and a 10-20 year period, an investment that Japanese brands have already made which has given them a low cost of operation in the long term.
Armin Keller, operations director of Volkswagen Marketing Department, ASEAN Project, was also speaking at the same panel where he was quoted as saying ““Japan has built a large network in ASEAN countries because it entered market 40 to 50 years ago and has consolidated everything. Facing a large potential market, the European brands such Volkswagen and the Chinese brands with great advantage are also seeking their opportunities.”
The Thai market is heavily focused on dual use vehicles such as modified pick up trucks, therefore Chinese SUV and pick up truck manufacturers do have considerable oppertunity in the market owing to the demands for simple down to earth vehicles, something the Chinese have excelled at in recent years. Elsewhere, in South Asia the demand for small but spacious MPV’s is likely to give brands such as Wuling a greater opportunity to expand, especially in Malaysia or Indonesia.
According to Armin Keller, as the largest auto manufacturer in Europe and China, Volkswagen has invested in the Indonesian and Thailand markets on a small scale and this investment will increase with the expansion of the market as Volkswagen will set up its manufacturing facilities in the ASEAN countries to reach a production scale of 3 million units. Armin Keller said that Volkswagen will speed up its investment in the next 4 to 5 years in order to achieve rapid growth. “We wish to achieve success in this region although we have entered this market rather late”.
Volkswagen has the courage to challenge the Japanese car manufacturers because due to its influence as a European brand and its strong technology and high quality levels. To China, it has become a challenge for the automobile manufacturers to take a piece of the ASEAN market. Yeap Swee Chuan frankly stated: “Chinese brands have their advantages compared with the other brands but China cannot build a strong brand because it is too powerful, to impatient, too fast and too uneasy [in the markets].”