RECIPROCUSRESEARCHBRIEF

AutomotiveMarketinASEANPreparedby:ReciprocusInternationalDate:January2017

TableofContents

ExecutiveSummary 2

MacroeconomicOutlookoftheIndustry 3

IndustryOutlook andAnalysis 4

RegionalLandscapeandAnalysis 5

OpportunitySpotlightandAnalysis 6

1StrictlyPrivate&Confidential

ExecutiveSummary

• TheASEANregionhasstrongandsustaineddemandforautomobiles,supportedbythefollowingkeydrivers:robustprivateconsumptionandaboomingconstructionindustry.Thishastranslatedintogrowingdemandforpassengercarsandcommercialvehicles.

• WeseeincreasingdemandforautomotivecomponentsproducedinSingapore,especiallyamongplayersinThailand– theregionalhubforautomotivemanufacturing.

• TheASEANregioncontinuesasthelargestdestinationforSingaporeexportersinthevehiclespace.However,autoindustryexportsfromSingaporetotheregionshrankataCAGRof-11.1%toavalueofUS$1.08billionin2015.

• Despitethis,growthopportunitiesarestillpresentintheregion, withtwoexamplesbeingMalaysiaandMyanmar,amongothers.

• Basedonourresearch,MalaysiaisthesecondlargestdestinationforautoindustryexportsfromSingapore,withatotalvalueofUS$353.9millionin2015andamodestCAGRof1.59%overtheperiod2011-2015.Malaysia’svehiclefleetisalsoforecastedtogrowataCAGRof5.5%over5yearstoreachasizeof17.3millionby2020.

• Myanmar’splanstodevelopmentitspublictransportsystemandcontinuedinfrastructuredevelopmentprojectsarealsoexpectedtocreatedemandforcommercialvehicles.Singapore’sautomotiveindustryexportstoMyanmargrewatarelativelyhighCAGRof3.73%over4yearstoreachavalueofUS$56.6millionin2015.

• Meanwhile,SingaporeexportsofautomobilestoThailandhasbeenrelativelysteadywithaCAGRof1.95%over2011- 2015toreachavalueofUS$170.3millionin2015.ThisisduetothesaturationofthemarketwithlargemultinationalmanufacturersasThailandisasignificantmarketforautomobileexportsandremainsacrucialregionalautomotivemanufacturinghub.

• GiventheamplepossibilitiesbeingobservedacrosstheASEANautomotivemarket,wewouldrecommendthatSingaporecompaniesconsiderexploringopportunitiesinthisregion,withaparticularfocusonMyanmarandMalaysia.

2StrictlyPrivate&Confidential

MacroeconomicOutlookoftheIndustry

BusinessOverview

3StrictlyPrivate&Confidential

Ø TrendAnalysis:SalesofautomobilesintheAPACmarketisprojectedtogrowatasteadyCAGRof5.3%overtheperiod2015-2020andreachsalesof46.59millionunitsby2020.ThisputsvehiclesalesgrowthintheAPACregiontobesecond-bestglobally,behindtheMiddleEast,butthemoreevendistributionofgrowththroughouttheregionmakesAPACamorestableandconsistentoptionforgrowththanMENA.

Ø KeyDrivers: TheAPACdemandforautomobilesisprimarilydrivenbystrongprivateconsumptionandagrowingconstructionindustry,whichisexpectedtocreategreaterdemandforpassengerandcommercialvehicles.ThereisalsoexpectedtobecontinuedgrowthinthedemandforautomotivecomponentswithapipelineofinvestmentsinproductionfacilitiessuchasBMW’shybridvehiclebatteryfactoryinThailandandNissan’sengineandtransmissionproductionfacilityinIndonesia.

Ø MarketLeaders:TheautomotivemanufacturingspaceisdominatedbymultinationalcompaniessuchasHonda,Toyota,MitsubishiMazdaandHyundai.ThesecompanieshaveasignificantpresenceinThailand,whichremainsaregionalproductionhubforautomanufacturers.

APACAutomotiveManufacturingVolume APACAutomotiveManufacturingOutputGeographicBreakdown

-4% -3% -2% -1% 0% 1% 2% 3% 4%

97

98

99

100

101

102

103

104

2011 2012 2013 2014 2015

Num

bero

fVeh

icles,million

Units,million Growth,%

China

44% Japan

25%

SouthKorea10%

India8%

RestofAPAC13%

IndustryOutlookandAnalysis

AnalysisBreakdown

4StrictlyPrivate&Confidential

Porter’s5ForcesAnalysisØ PowerofBuyers:Dealershipscommonlyhaveexclusive

contractualagreementswithmanufacturersresultinginveryhighswitchingcosts.Dealershipsaredependentonmanufacturersastheproductisindispensabletothem,reducingthepowerofbuyers.

Ø PowerofSuppliers:Automobilemanufacturersoftenhavesupplierswhomanufacturefabricatedcomponentsfromrawmaterials.Manufacturershaveexpandedsignificantlyinemergingcountriestohaveareliablesupplierbase,resultinginamoderatepowerofsuppliers.

Ø DegreeofRivalry:Theautomotivemanufacturingindustrymainlyconsistsoflargescaleinternationalcompanies,althoughtherelativelylownumberoftheselargecompetitorsanddifferentiationofproductsmoderatesthisrivalrytoanextent.

Ø SubstituteThreat:Consumerattitudeswhichincreasinglyfocusuponreducingrunningcostscouldcontributetowardsashiftindemand.Alternativessuchaspublictransport,canposeasubstitutethreat.

Ø LikelihoodofNewEntry:TherearerelativelyhighbarrierstoentryduetothehighcapitalexpenditureandinvestmentinR&Dneeded.Thetighteningofemissionstandardsposesgreaterchallengesforautomanufacturers,particularlyforsmallscaleproducers.However,theemergenceofarelativelynewsegmentforelectricvehicles,newentrantscanestablishthemselvesasspecialtymanufacturers.

012345

Power of Buyers

Power of Suppliers

Degree of Rivalry

Substitute threat

Likelihood of new entry

RegionalLandscapeandAnalysis

APAC

MyanmarandMalaysiaareexamplesofgrowth

opportunitiesintheAPACregion

AmericasEMEA

BubbleChart

Ø Growingdemandforautomobiles: Theregion’scommitmenttoinfrastructuredevelopmentisexpectedtodrivedemandforcommercialvehicles.AnimprovingeconomicbackdropintheASEANregionisexpectedtodrivesalesofpassengervehiclessegment.

Ø EmergingopportunitiesinASEANexportmarket:SingaporeiscurrentlytheseventhlargestexporterofautomobilesandcomponentstotheASEANregion.However,thereisstillopportunityforgrowthastheASEANcountries’importvolumefromSingaporeisrelativelysmallcomparedtolargermajorproductionhubssuchasJapan,ThailandandChina.

5StrictlyPrivate&Confidential

GlobalExportsofAutomobiles&ComponentstoASEAN:GrowthandVolumebyCountry

Negative Growth

High Export Volume

Low Export Volume

Singapore

Japan

KoreaIndonesia

Thailand

Positive Growth

China

Population:30.3millionTotalGDP(2015):US$296.3billionAutomobilesImport(2015):US$5.77billion10-YearCAGR:7.5%

Malaysia

Population:53.9millionTotalGDP(2015):US$62.6billionAutomobilesImport(2015):US$1.43billion10-YearCAGR:18.0%

Myanmar

Germany

UK

OpportunitiesSpotlightandAnalysis

WhyMyanmar?

6StrictlyPrivate&Confidential

WhileMyanmarandMalaysiashowsignificantpotentialforgrowth,weseepotentialforheadwindsintheThaiautomotiveindustry.DespiteThailandbeingacrucialproductionhubforallthemajorJapaneseautomakers,thepoliticaluncertaintywithinThailandhasresultedinthecountrylosingsomeinvestmentstoIndonesia.Assuch,growthofSingaporeexportsofautomobilestoThailandhaveremainedsteady,witha3yearCAGRof1.95%.However,giventheoverallgrowthofothercountriesintheASEANregion,thissuggestsSingaporehasbeenmissingoutonopportunitiesandshouldconsiderexploringthepotentialforgrowthinthisregion.

MyanmarØ GrowthinautoindustryexportsfromSingaporetoMyanmaristhethird

highestamongtheASEANcountries,withaCAGRof3.7% over2011-2015.Ø Myanmar’svehiclefleetisforecastedtogrowataCAGRof11.6%overthe

period2015– 2020toreachasizeof1.46million.Ø Thedemandforheavytrucksusedininfrastructureanddambuilding

projectsisexpectedtoincreaseasimprovedroadscreatebetterconditionsforlong-haultransportationofgoods.

Ø WithMyanmarlookingtomoderniseit’spublictransportnetwork,thereissignificantgrowthpotentialinthecommercialvehiclesegment.ThedevelopmentofanewbussysteminYangonspecificallyhighlightstheuseofnewbuses,whichpresentsakeyopportunityforautomakers.

MalaysiaVehicleFleetVolumeMalaysiaØ Malaysiaissecondlargestdestinationforautoindustryexportsfrom

Singapore,witha3yearCAGRof1.6% over2011-2015.Ø It’svehiclefleetisexpectedtogrowataCAGRof5.5%over5yearsto

reachasizeof17.3millionby 2020.Ø Ariseinbusinessconfidenceandcontinuedsupporttotheconstruction

industrytosupportgrowthinthecommercialvehiclesegment.Ø IncentivesunderMalaysia'senergyefficientvehicle(EEV)schemewillassist

thecountry'sambitiontobecomeanautoexporthubintheregion,providinganalternativetoThailandandIndonesia.ThisissupportedbytheBeijingAutoInternationalCorporation establishingaelectricvehiclemanufacturingplant,whichisexpectedtocreategreaterdemandforimportsofautomotivecomponents.

WhyMalaysia?

MyanmarVehicleFleetVolume

0%

2%

4%

6%

8%

8

9

10

11

12

13

14

2011 2012 2013 2014 2015

Vehiclefleet,mn Growth,%

0%

10%

20%

30%

40%

0.0

0.2

0.4

0.6

0.8

1.0

2011 2012 2013 2014 2015

Vehiclefleet,mn Growth,%

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7StrictlyPrivate&Confidential

ThisreporthasbeenpreparedbyTunLinWin(January2017),basedonareviewofpubliclyavailableinformationandexistingmarketintelligenceon-handatReciprocus.

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