On 13th October, the ASEAN region, which has stood in the shadows of other Asian markets for a long time, formed the focus of the International Automotive Congress at the Wolfsburg AG Forum AutoVision. The region, which is the world's third-largest free trade area, is an extremely interesting, but also very heterogeneous market for automotive manufacturers and globally operating supplier companies, in particular thanks to the increasing incomes and propensity to consume of its constantly growing middle class. At the event, high-ranking speakers and representatives from different automotive companies operating in the ASEAN states and from a number of associations provided analyses and experience reports that helped the 200 participants attending the congress to improve their understanding of the special features of the Southeast Asian automotive market. The Association of Southeast Asian Nations (ASEAN) is the partner region of the 8th International Suppliers Fair for companies in the automotive supplier industry, which will begin in Wolfsburg on 14th October.
“By providing insights into the political, societal and economic heterogeneity of the ASEAN states and the inconsistent market requirements that result from this diversified situation, the congress provided practical support and advice for companies planning to get involved in the Southeast Asian market", declared Julius von Ingelheim, the Spokesman of the Board of Wolfsburg AG, in his extremely positive summary of the event. At the congress, participants from all over Europe made the most of the opportunity to gain a first-hand insight into the current and future developments of this growth region.
The event, which was organised by the company Wolfsburg AG, began with a speech by the Mayor of Wolfsburg, Klaus Mohrs, who welcomed the participants from the worlds of industry, science and politics. In his speech, Mohrs emphasised the special attractiveness of Wolfsburg and the surrounding region as a mobility location that provides ideal conditions for supplier companies from all over the world. He also stated that over the past 15 years, leading Asian companies such as Yazaki or Sumitomo have relocated here.
“Localisation” as a Strategy for Southeast Asia
The congress also boasted a high-profile speaker in the form of Soerjono Soerjono, the Minister of Industry of the Republic of Indonesia, who used his positive evaluation of the growth prospects in Southeast Asia to position the region as a very promising location. He also explained that companies need to be prepared to deal with the very heterogeneous requirements of the ASEAN automotive markets. Norbert Vogt, the Regional Sourcing Director of the Volkswagen Group Malaysia, then opened the discussions in the topic group of "Change | Opportunities | Strategies” by claiming that "localisation is the suitable strategy for successful involvement in the region. In addition, it provides an important opportunity for optimising the global supply chain and tapping into the strengths of the ASEAN region." The opportunities involved in regional production, localisation and networking activities was an issue in most of the presentations that followed. "The growth markets of the ASEAN region are of strategic importance for the Volkswagen Group. Our objective is to further expand our current market position in Southeast Asia and to significantly increase our market share in that part of the world on a long-term basis", explained Weiming Soh, the Chief Representative and President of Commercial Operations in Greater China/ASEAN at Volkswagen AG, in his talk on the dynamic development of the ASEAN automotive market.
Using the Advantages of the Free Trade Area
Thomas Schäfer, the Senior Vice-President of Group Manufacturing Overseas at Volkswagen AG, informed the congress participants that the Volkswagen Group is currently particularly focusing on the so-called Tiger Cub Economies in the ASEAN region. He explained that Volkswagen’s partner companies Indomobil in Indonesia and DRB-HICOM in Malaysia have been assembling vehicles for the group since 2009 and 2012 respectively and that Volkswagen has also been selling imported vehicles in the Philippines since September 2013. “Companies that run or commission production activities on location", declared Schäfer confidently, “clearly benefit from the advantages provided by the free movement of goods among the ASEAN states.”
From 2015 onwards, the free trade area agreement ACFTA will eliminate most of the customs barriers in place in the region, while customs duties of up to 100 percent will continue to be charged for the importation of finished products. At the same time, the ASEAN Economic Community (AEC) will form a huge liberalised economic zone with harmonised statutory regulations that will open up a multitude of different opportunities both within the region and for all countries and regions that are associated with ASEAN in free trade agreements.
As a result of this development, the ASEAN region plays a particularly important role as a strategic hub for automotive trade activities with China, Taiwan and Australia, as was underlined by many speakers. The Southeast Asian market has doubled over the past decade and Indonesia, Thailand and Malaysia alone were responsible for 90 percent of this growth. In this light, the region has the potential to become the world’s sixth-largest automotive market by 2018.
Opportunities for Entry into the Southeast Asian Market
In the afternoon of the congress, high-ranking representatives from the Malaysian companies DRB-Hicom and the WSA-Group spoke about the potential available for bilateral business partnerships in Southeast Asia. Thomas Chambers, the Managing Director of Continental Automotive (Thailand) Co. Ltd., and Norbert Brosi, the Executive Vice-President of Bosch Automotive (Thailand) Co. Ltd., explained the strategies used to position their companies in the market on location in the region. After these talks, the Deutsche Investitions- und Entwicklungsgesellschaft (German Investment and Development Society - DEG) and the German-Thai Chamber of Commerce presented a number of financing and funding solutions. "Many ASEAN states are striving to attract foreign investors to their countries and therefore offer special tax incentives for the construction of production facilities. In Thailand, for example, foreign companies are completely exempt from business tax for the first eight years and only have to pay business tax of 50 percent in the following five years", explained Cornelius Thor, DEG Head of Department German Corporates.
After a brief summary of the day by the event host Claus-Peter Köth, the Editor of the German specialist magazine “Automobil Industrie”, Julius von Ingelheim gave a closing speech in which he invited the congress participants to use the 8th International Suppliers Fair as an opportunity to have valuable discussions with the more than 50 companies from the ASEAN partner region exhibiting at the event.