ASEAN common market Nantapong Pantaweesak Punyapob Tantipidok Kon Thueanmunsaen
Agenda Did we achieve the common market? Future of regional auto industry Business implications 2
Common market is a stage of regional integration thru free movement of production factors 1 2 3 4 5 Free trade area Custom union Common market Economic and monetary union Complete integration Diminishing trade barrier toward 0% + Common external tariffs (CET) + Freedom of production factor movement + Common economic policy, currency + Common foreign affairs policy or internal affairs EFTA* CEFTA** NAFTA European common market (1957) ASEAN Mercosur*** European Community (EC) AEC EEA**** European Union (EU) Note: *EFTA: European Free trade Association Iceland, Liechtenstein, Norway, Switzerland, ** Central European free trade agreement: Poland, Hungary, Czech, Albania, Bosnia, Serbia, Slovenia ***Mercosur: Argentina, Brazil, Paraguay, and Uruguay ****European Economic Area: EU+EFTA Source: EIC analysis based on Balassa (1967) 3
Car producers have benefited from regional agreements reflecting in their regional supply chain EU NAFTA China ASEAN +6 LAFTA Source: EIC analysis 4
Key imports are limited to crossover segments, comprising less than 10% of sales in Thailand Top imports 2017 Sales 6,665 90% 10% 6,426 4,868 4,835 3,815 1,815 Source: EIC analysis based on data from Headlightmag 5
EU: Other efforts to promote a single market Driving license: Single license valid throughout EU Only apply license in the country where you live (at least 185 days) No EU rules on driving training Driving license Common customs tariff Car market in EU Common custom tariff: 0% within EU zone Car registratio n Car registration: Register car where you live. Moving <6 months no need to register Moving >6 months register asap Consumer rights: Receive protect by EU consumer right, 2 years guarantee if the car you purchased turns out to be faulty or not as advertised Consumer right Insurance Insurance: 3 rd party insurance valid in all other EU countries Source: EIC analysis base on Europa.eu, Goldberg and Verboven (2000), Dvir and Strasser (2014) 6
EU: Small price dispersion could also be observed, due to differences in features, VAT, markup, and other issues Car price comparison in EU Price dispersion factors Unit: Euro VAT* (17% - 27%) Markup by country preferences Country Benz E-class 220d Toyota Yaris 1.0 VVT benzyne Italy 55,964 15,150 Spain 52,100 14,300 Ireland 50,325 16,950 France 49,950 14,750 Slovenia 49,840 12,750 Germany 47,338 13,490 Features Price Other issues Features: such AC or safety rule but depends on customer willingness to pay (WTP) VAT: Buying new car in EU countries requires VAT payment in the country where register car Markup: Country preferences such as Italian prefer Italian car Issues: dealer choosing, grey market, car registration Note: *VAT: Germany 19%, France 20%, Spain 21%, Slovenia and Italy 22%, Ireland 23% Source: EIC analysis based on Europa.eu, Goldberg and Verboven (2000), Dvir and Strasser (2014) 7
ASEAN: Intraregional trade within ASEAN has been increasing despite existing trade/non-trade regulations Intraregional trade of auto in ASEAN Cross border agreement in AEC Unit: USD billion (HS87) Brunei Darussalam Thailand Philippines Indonesia Singapore Vietnam Malaysia Laos Cambodia Land transport: Highway, Signs, safety 1 2 3 4 5 5 +18% 9 7 6 10 11 14 13 13 13 s Driving license National Single window AEC Insurance Car inspection 2001 2003 2005 2007 2009 2011 2013 2015 Source: EIC analysis based on Trademap, ASEAN.org 8
ASEAN: High price dispersion could be observed among ASEAN markets, despite being viewed as a part of Asia Car price comparison in ASEAN Players geographical segmentation Unit: $, Local currency Country Benz E-class Avantgarde * Thailand $114,595* (3,580,000) Indonesia $79,030 (1,129,000,000) Malaysia $89,102 (378,888) Singapore** $191,818 (269,888) Philippines $84,244 (4,390,000) VIOS E $21,768 (679,000) $20,244 (289,200,000) $20,934 (81,980) $62,256 (84,988) $18,269 (953,000) Cambodia - $31,000 Brand Asia Europe North America Others Japan Middle East, India, ASEAN China, Japan, NAFTA South America Note: *e350e avantgarde for Thailand,Indonesia, Malaysia. Singapore e250 avantgarde CKD **Factors added on Open market value price (OMV): Additional Registration Fee (ARF), Excise Duty (20%) and GST (7%), Dealers margin and Certificate of Entitlement (COE) Source: EIC analysis based on OTP, MD 9
ASEAN: While tariff has decreased, NTMs have increased over time which are mostly TBT in Automotive Note: *SPS: Sanitary and phytosanitary TBT: Technical barrier to trade Source: ERIA 10
ASEAN: There are high numbers of NTMs in ASEAN and around 700 products in auto sector are affected by NTMs NTMs in ASEAN in 2015 Unit: measures NTMs by sectors Unit: tariff lines SPS TBT Export-related measures others Machinery/ electricl Chemical Textiles 860 1,243 1,912 1,614 Vegetable 765 Animal 669 Wood 669 Metal 669 Transports (Auto) 669 845 713 555 524 516 375 301 238 172 Foodstuffs Miscellaneous Plastic Stone Mineral products Raw leather 573 478 382 287 191 96 Fottwear 0 TH PH MY IN SG BN VN LA KH MM Source: EIC analysis based on ERIA 11
THAILAND: ASEAN and Oceania are key destinations, although shares have been stagnant Thai car exports Unit: USD billion (HS8703) Thai pick up exports* Unit: USD billion (HS8704) Thai car part exports Unit: USD billion (HS8708) ASEAN Oceania Middle East NAFTA EU China Japan Chile 11 11 11 10 10 10 9 8 9 8 +12% 9 8 7 +18% 7 7 6 6 6 5 4 33% 5 4 5 4 +17% 3 3 51% 3 2 29% 1 0 2001 2003 2005 2007 2009 20112013 2015 2017 2 1 s 24% 0 200120032005 2007 2009 2011201320152017 2 1 36% 0 2001 2003 2005 2007 2009 2011 20132015 2017 Source: EIC analysis based on Trademap 12
Agenda Did we achieve the common market? Future of regional auto industry Business implications 13
Regional vehicle market is expected to see just above 4 million units by 2023, which is just 70% total capacity ASEAN vehicle sales Unit: Million units Thailand Malaysia Indonesia Philippines Vietnam Other Capacity (2016) = 6 million units 4.1% 2.6 3.8% 3.5 3.6 3.3 3.2 3.1 3.2 0.3 3.4 3.5 0.4 1.1 3.6 3.8 4.0 4.2 0.4 0.6 1.4 CAGR +8% +8% +5% 0.6 0.6 +0% 0.9 1.0 +2% 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F 2021F 2022F 2023F Source: EIC analysis based on data from OICA 14
Including exports, regional production is expected at 5 million units in 2023 mainly contributed by expansion in Indonesia ASEAN vehicle production Unit: Million units Thailand Malaysia Indonesia Philippines Vietnam Capacity (2016) +3.6% +5.5% = 6 million units 2.9 4.1 4.4 3.9 3.8 4.0 4.0 0.2 0.1 1.2 4.1 4.3 4.4 4.6 4.8 5.0 0.3 1.9 CAGR +6% +5% +7% 0.5 0.4-1% 2.0 2.2 +2% 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F 2021F 2022F 2023F Source: EIC analysis based on data from OICA 15
Only the Philippines and Vietnam may face small squeezing on capacity ASEAN motor car production 2023F vs current production capacity Unit: Million units 2023F Capacity (2016) 3.0 2.2 2.2 1.9 0.4 0.6 0.2 0.2 0.3 0.1 Thailand Malaysia Indonesia Philippines Vietnam Source: EIC analysis based on data from OICA 16
Beyond regional: PC Back-up Source: EIC analysis based on data from MOC (2017) 17
Beyond regional: CV Back-up Source: EIC analysis based on data from MOC (2017) 18
Beyond regional: Parts Back-up Source: EIC analysis based on data from MOC (2017) 19
Agenda Did we achieve the common market? Future of regional auto industry Business implications 20
EU: Car makers essentially produce where it makes sense Source: MPRA (2014) 21
NAFTA: Non-American carmakers have increased production capacity in the US Source: Nikkei 22
ASEAN+1: After 2017, Australia will be the only major industrial country with no vehicle assembly whatsoever * It took less than 15 years from the summit to the bottom Unit: Units *Stanford (2017) Source: EIC analysis based on data from Key Automotive Statistics Australia 23
Growth of GDP per capita High growth could not be expected in Thailand as previously Relationship between growth of GDP per capita and growth of workforce Unit: % 8% 7% 6% 5% 4% 3% 2% 1% It is not easy to reach 3% growth 2001-10 2001-10 0% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Growth of labor force Source: EIC analysis based on data from World Bank 1991-00 2001-10 1981-90 2001-10 1981-90 2001-10 2001-10 2001-10 1981-90 2001-10 1991-00 1991-00 2001-10 2001-10 1981-90 1991-00 1981-90 24
Production growth of selected emerging countries* outpaced that of the world, resulting in a significantly higher share Global Motor Vehicle Production Unit: Thousand Vehicles CAGR (2005-2016) 67,126 29% 94,784 7% 17% 30% Total Others Selected emerging countries China +4% -1% +7% +16% 71% 47% Tier 1 Production Countries (Developed Countries) -1% 2005 2016 * Selected countries are South Africa, Slovakia, Indonesia, Czech Republic, Turkey, Thailand, Mexico and India. Source: EIC analysis based on data from OICA 25
Mexico and India are the two largest producers in the selected group Motor Vehicles Production Unit: Thousand Vehicles % share of world s total production 0.6% 1.1% 1.2% 1.4% 1.6% 2.1% 3.8% 4.7% South Africa Slovakia Indonesia Czech Republic Turkey Thailand Mexico India CAGR (2005-2016) 1% 15% 8% 8% 5% 5% 7% 10% 4,489 3,597 525 599 218 1,040 501 1,177 602 1,350 1,486 879 1,123 1,944 1,684 1,639 2005 2016 2005 2016 2005 2016 2005 2016 2005 2016 2005 2016 2005 2016 2005 2016 Source: EIC analysis based on data from OICA 26
South Africa, Indonesia, Turkey and India are mainly producing to serve domestic demands Motor Vehicles Sales and Exports Unit: Thousand Vehicles South Africa Slovakia Indonesia Czech Republic Turkey Thailand Mexico India 4,489 Exports* Domestic Sales 3,597 18% 54% 1,944 1,350 1,486 82% 1,177 1,040 11% 32% 60% 599 78% 46% 9% 90% 89% 68% 91% 40% 10% 22% 2016 2016 2016 2016 2016 2016 2016 2016 *Exports = Production Domestic sales Source: EIC analysis based on data from OICA 27
Disclaimer The information contained in this report has been obtained from sources believed to be reliable. However, neither we nor any of our respective affiliates, employees or representatives make any representation or warranty, express or implied, as to the accuracy or completeness of any of the information contained in this report, and we and our respective affiliates, employees or representatives expressly disclaim any and all liability relating to or resulting from the use of this report or such information by the recipient or other persons in whatever manner. Any opinions presented herein represent our subjective views and our current estimates and judgments based on various assumptions that may be subject to change without notice, and may not prove to be correct. This report is for the recipient s information only. It does not represent or constitute any advice, offer, recommendation, or solicitation by us and should not be relied upon as such. We, or any of our associates, may also have an interest in the companies mentioned herein.
29