ASEAN beckons India, China parts makers

Given the ASEAN region's emergence in Asia, there are opportunities to be had there for both vehicle and component manufacturers but they need to move fast.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 17 Jan 2013 Views icon2062 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
ASEAN beckons India, China parts makers
The realisation of the ASEAN Economic community in 2015 presents both opportunities and threats to the changing automotive landscape of the South East Asian region.

Foremost, a successful ASEAN integration will support the long-term goal of creating a region with free movement of goods, services, investment, skilled labour, and freer flow of capital. This in turn is likely to lead to faster economic growth and an ever-expanding middle class. As LMCA’s Asia-Pacific director May Arthapan aptly titled a recent presentation, ASEAN could well become 'Another BRIC In The Wall' given the region’s emergence in Asia.

Not only are there opportunities for vehicle makers to expand sales in a big way, but component makers too are going to benefit from increasing manufacturing activity in ASEAN, led by Thailand and Indonesia.

Japan’s component makers through their long-established presence will clearly be the biggest beneficiaries, but there are also opportunities for companies from India and China.

To be certain, component makers in both India and China have been eyeing the region for a while now. This has been evident from increased participation, especially from companies in China, in the region’s trade shows. However, component makers from both nations have been wary to enter unfamiliar territory and face strong Japanese competition.

A most important factor for these component makers is deciding on the market to begin operations, which is typically a choice between Thailand and Indonesia.

Thailand, no doubt, will remain Southeast Asia’s biggest manufacturing base. But it also has the region’s most developed ecosystem, thanks to Japan’s automakers and their suppliers.

Braving this threat, India’s NRB Bearings, for instance, decided to set up its manufacturing unit in 2007. And it hasn’t been easy. This is perhaps why others did not follow suit, even after Tata Motors started operations in Thailand, not convinced of high enough volumes to justify new investments.

In contrast, a faster growing Indonesia market convinced the UNO Minda-NK Minda Group to start operations there. It supplies switches and automotive lamps, counting Daihatsu among its customers.

An industry veteran in India points out many companies also haven’t rushed to Southeast Asia because they need more clarity on the costing structure in the region.

Brand India is weak in Southeast Asia; thus, competitive pricing will be a most critical factor for India’s component makers to win new orders against Japan’s suppliers. We believe that India’s companies will need to rely on value engineering to mitigate higher costs from labour, raw materials or government duties. More support from India’s government towards businesses going global would not hurt either.

The risk for India’s component makers is that as orders to Europe contract, they need to find alternative markets to stay in profit. Southeast Asia and its integration could be a solution.

The all-important decision to enter this region has to be made now. Delay, and this window of opportunity is likely to be lost.

Ammar Master, Manager, LMC Automotive
India Auto Inc sells record 2.85 million vehicles in November, 16 million in first eight months of FY2024

auther Autocar Pro News Desk calendar06 Dec 2023

Automobile dealers sold 95,141 vehicles on each day of November 2023 to set a new monthly benchmark of 2.85 million unit...

Bajaj Auto plugs into electric three-wheeler growth story, sells 1,232 units in November

auther Autocar Pro News Desk calendar05 Dec 2023

Three-wheeler market leader’s recently launched zero-emission passenger and cargo models have sold 3,314 units in the pa...

EV sales in India jump 50% to 1.38 million units in January-November 2023

auther Autocar Pro News Desk calendar04 Dec 2023

India EV Inc, which is just 112,886 units away from achieving record sales of 1.5 million units in CY2023, has registere...