With the US car market in serious trouble, Asia was expected to carry the auto world on its shoulders. The Economist Economic Unit, for example, had forecast car sales growth of seven per cent for 2008 and 2009, and nine per cent in 2010 for the region.
But this may prove to have beeen a bigger responsibility for the region than originally anticipated. Already, India and China, the world’s two biggest potential auto markets, are slowing. Indian car buyers depend on credit, and the credit crisis has dampened sales and October saw sales of passenger cars fall 9.1 per cent. In contrast, most Chinese buy with cash, but sales were still up only 3.4 per cent for the same month.
The days of double-digit growth in car sales are gone for now, as consumers across the region adjust to a new financial landscape and forge a new regimen of car buying behaviour.
Of particular significance are prices at the pump. In a Nielsen survey of car-owners in 14 Asia-Pacific countries, 48 per cent said costly petrol was affecting car use “somewhat” while 35 per cent answered “a lot”. Taiwanese reacted most strongly, with 87 per cent reporting they are using their car less.
Meanwhile, 28 per cent of Japanese are riding their bikes more, while 24 per cent of Malaysians claim to be car-pooling.
Such changing consumer attitudes could, however, signal an opportunity in the market, especially for those car brands that place emphasis on lower costs. According to the Nielsen study, 15 per cent of those surveyed said they were planning to buy a car that is more fuel-efficient.
“Smaller, cheaper cars are more to the forefront of people’s minds,” says Jon O’Loughlin, global director of Synovate Motoresearch, cautioning that it is still too early to tell if this will translate into buying behaviour.
And it is not only cost that is making an impression on consumers. Several years of rising oil prices have also opened eyes more to green auto brands.
Leading perceptions across the region in this respect is Toyota. In a survey of potential car buyers, Synovate asked consumers which company was doing the most to bring new technologies and alternatively fuelled vehicles to market. Toyota was frontrunner in all Asian countries surveyed - Malaysia, Thailand, Taiwan and China.
Toyota has built and promoted its midsize sedan Prius for 10 years, and by early 2007 had sold one million hybrids, including its Camry and Lexus models, around the globe. One third of these were bought in Japan.
Honda, with its Civic, was a strong second for green credentials in the Synovate survey.
Hybrids are not the only option. Across Asia, governments are promoting an array of alternative fuels, and as these become available, manufacturers see potential opportunities. Ford, General Motors, Nissan, Hyundai, Tata, Murati and others, are designing a bewildering array of alien technologies powered by science fiction fuels.
However, consumers are in danger of being confronted by too many choices. Four engine types - hybrid electric, battery electric, fuel cell and direct injection diesel - have already debuted.
Next come the fuels. Petrol and alcohol are mixed in a dozen blends like E20 or D6. There is natural gas - LPG and CNG - and even hydrogen. Some might even prefer simply plugging their car into wall outlet when returning home at night.
“Consumers are not sufficiently informed about new alternative energies, and have doubts about the maturity of new technologies,” says TNS Automotive director for North Asia Klaus Paur, referring to a China study. “Concern over immature technology is one of the main reasons car buyers don’t consider alternative energies.”
In other words, potential buyers want to know what fuel or technology will be around in the longer term. No one wants to get stuck with the automotive equivalent of the Betamax, an expensive new technology that soon becomes obsolete.
“Take the case of Toyota Prius and the Honda Civic hybrid,” says Synovate’s O’Loughlin. “Both run on fuel cells and everyone thought this would be the technology, then along came Volkswagen with its Blue Motion based on a very efficient diesel technology.”
While consumers may be hesitant about alternative fuels, auto manufacturers in the region are busy working overtime.
In China, for example, Toyota began making the Prius in China in late 2005. Chang’an, a partner of Ford and Suzuki, launched its Jie Xun and proudly displayed 50 of them at the Beijing Olympics.
Similarly, Shanghai General Motors, the largest foreign auto manufacturer in China, kicked off its ambitious CSR campaign ‘Drive To Green’, a joint effort of industry and universities for creating green manufacturing and vehicles.
At dealership level, however, not much is happening. Combined sales in China are in the low thousands, and market share is just 0.06 per cent of total passenger cars.
“Prius sales in China are extremely low, because of the high price,” says TNS’ Paur. Sources say costly imported parts are the cause. “Locally-branded hybrids are available but awareness is low.”
China is a price-sensitive car market: the Chinese want a green car if they don’t have to pay extra for it. Similarly, in India, low cost and fuel-efficient vehicles are dominating the market. “India is a cost-conscious country as far as cars are concerned,” says Pradeep Saxena, senior VP, TNS Automotive, in New Delhi.
A new and alternative way for car-buyers to save is with LPG- or CNG-fuelled vehicles. The first in the market was Maruti’s Wagon-R Duo, launched in July 2006, but there are now many others. Even Mercedes Benz claims to be ramping up for CNG variants for India’s roads.
Alternative fuel cars sell themselves, says Saxena. “No marketing is needed to sell cars running on alternative fuels because they either give better mileage or use less expensive fuel,” he says. “People realise they are cheaper to run.”
Sales are limited only by the local supply of LPG or CNG, according to Saxena. “These alternative fuel vehicles do not have their own ‘brands’,” he adds. “They are variants of existing models, which are heavily marketed, and people are aware and positively disposed toward them. The marketing is in the pricing. What they do is keep price within reach.”
Another Asian country leading the green auto push is Thailand. But unlike China and India, Thailand’s focus is on fuel rather than manufacturing. According to the Synovate study, when asked which company was making progress in alternative fuels, Thais ranked the state-owned PTT, the petroleum authority of Thailand, at number two, just behind Toyota.
By the end of October, PTT had doubled its year-to-date adspend to 436 million baht (US$12.4 million), compared to the first 10 months of 2007. Much of this was to advertise its E20 fuel, available from January, which, accompanied by tax incentives for E20-compliant passenger cars, kicked off a sales boom early in the year.
Readying itself for the market, Ford has launched its E20-ready Focus and Escape 3.0 L. Toyota came out with model variants for the new Vios, Camry, Yaris and Corolla Altis, and offered them with steep discounts. Honda had its City-ZX, Civic, Accord and CR-V, while Nissan offered its Teana and Tiida.
Car sales leaped 33 per cent for January through to May, according to industry statistician Toyota Motor Thailand. PTT, meanwhile, estimates 150,000 vehicles now use E20, while another three million vehicles are running on the E10 fuel. Another 115,000 cars use natural gas.
“The big luxury cars have been hit quite hard,” says Witchit Purepong, business development director at TNS Thailand. “With the economy, people are moving toward smaller cars.
“Two years from now, we should see the first eco-cars. Some of the car makers are already working on it here. It should be affordable as the government will give tax privledges.”
