Light vehicle production in the Asia Pacific region may slow down in 2024
The production of light vehicles in the Asia Pacific region ended strongly in 2023. The production of light vehicles in the region increased by nearly 10% year-on-year, reaching a historic high of 51.8 million units. This achievement is mainly attributed to the stable growth of production in the Chinese and Japanese markets, while the production performance in the Korean and Indian markets has also played a driving role to some extent. The strong performance of the export side is a key factor driving the growth of production in the Chinese market, and as a result, China has become the world's largest automobile exporter in 2023.
However, the trend of light vehicle production in the Asia Pacific region will change in 2024, and this year's production in the region is expected to be slightly lower than last year. This result is not unsatisfactory, but rather indicates that the production in the region is returning to normal after experiencing a high level in 2023. As the backlog of orders in the Japanese and Indian markets is gradually being digested, the production of light vehicles in the Asia Pacific region will gradually return to its usual level. From the demand side, due to the fully released suppressed demand after the epidemic, sales in most markets in the region are showing a weak trend.
The growth rate of light vehicle production in many Asian countries is expected to slow down, while production in Japan, South Korea, Malaysia, and the Philippines may even fall into a negative growth range. In January of this year, sales of light vehicles in Japan decreased by 12% year-on-year, marking the first year-on-year decline in nearly 17 months. Although the main reason for the decline in sales is that Daihatsu has stopped production and shipping, it is an undeniable fact that the overall sales in the Japanese market are generally weak after the suppressed demand is met and the backlog of orders is digested. The year-on-year growth rate of light vehicle sales in the country is expected to be less than 3% in 2024, while the growth rate in 2023 is as high as 14%.
After being investigated for safety testing fraud, Dafa has suspended the shipment of all its models since December 2023. According to the quick report, the sales of Daihatsu in Japan in January decreased by 63% year-on-year, and as a result, the total sales of microcars in Japan also decreased by 23%. However, among the 27 models that Daihatsu stopped supplying, the Japanese government has approved the resumption of supply for 15 of them, and the car company has also resumed production in February. Therefore, sales in the Japanese market are expected to rebound in the coming months.
LMC Automotive predicts that by 2025, Dafa will lose 5-20% of its sales share in the Japanese market, depending on whether and when the remaining 12 models that Dafa has not yet resumed production will pass the review. Given that other Japanese micro car companies have the ability and are likely to fill the sales gap left by the discontinuation of Daihatsu, regardless of the development of the situation, the impact of Daihatsu's fraud incident on overall sales in the Japanese market is relatively limited.
In January, another event that affected sales in the Japanese market in February occurred - Toyota discovered that its diesel engine developed by Toyota's automatic weaving machine had violated regulations during testing, and the car company suspended production of 10 models, including the Landcruiser and Hiace. It is currently unclear when Toyota can resume shipments of these models, as this depends on the review results of relevant departments. Similar to the Daihatsu incident, even if the final outcome of the Toyota incident is not ideal, the impact of its shutdown on market sales is expected to be minimal.
Due to the increasing pressure in the pure electric field and the weak strength of domestic car companies in pure electric products, the Japanese market faces greater risks on the export side. In addition, an increasing number of pure electric vehicles are being produced locally by sales countries that provide tax reduction and/or incentive policies. The above two factors will have adverse effects on Japan and other important light vehicle exporting countries in the Asia Pacific region, especially those that export heavily to North America and Europe. In major markets in the Asia Pacific region, South Korea also faces urgent risks on the export side.
The situation in Southeast Asia is different, as local light vehicle sales have been weak, and exports have become an important means for countries in the region to alleviate the impact on production. From the export situation of light vehicles (including future oriented pure electric vehicles), Southeast Asian countries mainly export cars to emerging markets within the region, Oceania, and other regions with lower localized production risks.
However, due to the Red Sea crisis leading to a diversion of freight routes, sea freight rates have remained high for a period of time, and the arrival time of goods has been delayed by several weeks compared to before. Therefore, the risks faced by the Asian region on the export and production sides are also constantly increasing. In addition to the increase in logistics costs, whether the long-term conflict in the Red Sea region will trigger a new round of global supply chain bottleneck crisis has also become an increasingly concerned issue for all parties.
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