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AEC to Bridge Development Gaps and Enhance ASEAN’s Role as a Global Supplier and Market

This market insight provides an overview of the integration of the ASEAN automotive sector under the ASEAN Economic Community (AEC) implementation and its effect on the barriers to trade. It also discusses the market situation in the ASEAN automotive sector, and analyzes details regarding the AEC, its impact, challenges, potential benefits, and the way forward after its implementation by December 2015. This report also includes the growth story of ASEAN, the quest towards one market for AEC, the likely impact and changing landscape of AEC, along with the achievements and challenges for destination 2015 and beyond.

ASEAN—The Growth Story
Since its inception in 1967, the Association of Southeast Asian Nations (ASEAN) has evolved into one of the most successful politico-economic groups in the world, representing a combined Gross Domestic Product (GDP) of $2.4 trillion in 2013, which is the seventh largest GDP in the world. In terms of industry, the automotive sector is the 5th largest global market (see Exhibit 1) and is likely to retain this position over the next five years.

For investors and automotive manufacturers, the growth opportunities in ASEAN are as significant as those presented by Brazil, Russia, India, and China (BRIC). Most of the growth in demand can be attributed to the 600 million and more inhabitants in ASEAN, as their incomes increase rapidly in the near term (2015—2017), riding on steady economic growth in the region. The low motorization across ASEAN coupled with the region’s increasing purchasing power constitutes a natural growth engine that is fueling explosive and unparalleled market growth (see Exhibit 2). Moreover, as ASEAN crosses the $3,000 GDP per capita mark, vehicle ownership is poised to grow twice as fast as per capita income.

ASEAN has also evolved into a significant base for automotive manufacturing. The region is the 6th largest manufacturer of vehicles (refer Exhibit 3) and is set to overtake Korea as the 5th largest base. The drive for manufacturing has been led by Thailand where export-driven policies have ensured that 50% of the manufactured product is exported. However, the export of vehicles in other ASEAN markets remains negligible. Other than Thailand, automotive production in ASEAN is mainly targeted at catering to domestic demand. As a result, the lack of alignment with global standards, supply chains and markets further inhibits exports.

Table Of Contents

Integration of the Automotive Sector under the ASEAN Economic Community (AEC)
ASEAN—The Growth Story 3
ASEAN Economic Community (AEC)—The Quest for One Market ...5
Likely Impact of AEC and the Changing Landscape ..7
Achievements and Challenges along the Way ...8
Destination 2015 and Beyond...11
Appendix ...12
Legal Disclaimer13
The Frost and Sullivan Story 14

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