AUTOMOBILE AND AUTO COMPONENTS INDUSTRIES IN ASEAN: CURRENT STATE AND ISSUES AUTOMOBILE AND AUTO COMPONENTS INDUSTRIES IN ASEAN: CURRENT STATE AND ISSUES Edited by RESEARCH INSTITUTE AUTO PARTS INDUSTRIES, WASEDA UNIVERSITY Copyright ©2014 by Economic Research Institute for ASEAN and East Asia and Waseda University All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical photocopying, recording or otherwise, without prior notice to or permission from the Publisher. DDIISSCCLLAAIIMMEERR The views in this publication do not necessarily reflect the views and policies of the Economic Research Institute for ASEAN and East Asia (ERIA), its Academic Advisory Council, and the Management. Table of Contents List of Figures ii List of Tables iii List Abbreviation and Acronyms iv Preface vii CHAPTER 1 Current State and Issues of the Automobile and 1 Auto Parts Industries in ASEAN Hideo Kobayashi CHAPTER 2 Logistics of ASEAN Automotive Components 25 Seiji Kurosu and Akira Koyama Mobility of Skilled Workers in ASEAN CHAPTER 3 33 Mitsuhide Shiraki CHAPTER 4 The CLMV Autombile and Auto Parts Industry 41 Hideo Kobayashi and Yings han Jin The Indian Automotive Industry and the ASEAN CHAPTER 5 51 Supply Chain Relations Tristan Leo Dallo Agustin and Martin Schröder Regarding the “ASEAN Economic Community and APPENDIX 115 Japan” Kazushi Shimizu and Hideo Kobayashi i List of Figures Figure 1.1 GDP per capita of ASEAN member states, 2012 2 Figure 1.2 Total vehicle production in ASEAN5 countries, 3 2010-2013 Figure 1.3 Total vehicle sales in ASEAN5 countries, 2010- 5 2013 Figure 1.4 Organisation of the IMV project 19 Figure 3.1 Management composition and careers in bi-national 35 and multinational TNCs Figure 3.2 Management composition and careers in 35 transitional TNCs Figure 5.1 Indian automotive components imports, exports, 66 and trade balance Figure 5.2 Automotive components’ import sources 67 Figure 5.3 Automotive components’ export destinations 67 Figure 5.4 Rane Group sales in 2012, by product 85 Figure 5.5 Number of Toyota Kirloskar Auto Parts employees 99 ii List of Tables Table 5.1 Vehicle production in India 61 Table 5.2 Indian vehicle sales by vehicle class 62 Table 5.3 Vehicle exports from India 63 Table 5.4 Passenger car sales by brand, FY 2011 and FY 2012 64 Table 5.5 Logistics Performance Index ranking of ASEAN 71 member states and India Table 5.6 Indian two-wheeler market in FY 2012 and FY 2013 73 (until November 2013) Table 5.7 Automotive parts JVs of TVS Group 74 Table 5.8 Tata Motors production volume by segment 80 Table 5.9 Tata Motors sales by segment and location 81 Table 5.10 Tata Motors’ Nano sales 83 Table 5.11 Hyundai’s domestic sales in and vehicle exports from 88 India Table 5.12 Pentadaewha customers by product 90 Table 5.13 Centralised and localised components production in 94 ASEAN and India Table 5.14 Production and export of components under the IMV 97 project Table 5.15 IMV project overview 98 iii List of Abbreviations AAF = ASEAN Automotive Federation = Automotive Component Manufacturers Association of ACMA India AEC = ASEAN Economic Community AIC = ASEAN Industrial Complementation AICO = ASEAN Industrial Cooperation AIP = ASEAN Industrial Program ASC = ASEAN Security Community ASCC = ASEAN Social and Cultural Community BAIC = Beijing Automotive Industry Holding Corporation BBC = brand-to-brand complementation CBTA = Cross-Border Transport Agreement CBU = completely built unit CEPA = Comprehensive Economic Partnership Agreement CKD = completely knocked-down CLM = Cambodia, Laos, and Myanmar CLMV = Cambodia, Laos, Myanmar, and Viet Nam CMF = Common Module Family CO2 = carbon dioxide EAFTA = East Asia Free Trade Agreement EEV = Energy Efficient Vehicle EU = European Union FDI = foreign direct investment FTA = free trade agreement GDP = gross domestic product iv GM = General Motors HS = Harmonized System (code) IMV = Innovative International Multi-purpose Vehicle IPC = International Parts Center IPR = intellectual property right JIT = just-in-time LCGC = low cost green car LCV = light commercial vehicle MERCUR = Mercado Común del Sur SOR MHIPE = Ministry of Heavy Industries and Public Enterprises MNE = Multinational Enterprise MRA = Mutual Recognition Agreement NAFTA = North American Free Trade Agreement OEM = Original Equipment Manufacturer PCMP = Progressive Car Manufacturing Program RCEP = Regional Comprehensive Economic Partnership R&D = research and development ROO = rules of origin SIAM = Society of Indian Automobile Manufacturers SKD = semi-knocked-down SUV = sport utility vehicle TCIE = Tan Chong Industrial Equipment THACO = Truong Hai Automotive Corporation TKAP = Toyota Kirloskar Auto Parts TNC = transnational corporation TPP = Trans-Pacific Partnership v VAT = value-added tax VW = Volkswagen WTO = World Trade Organization vi Preface The ASEAN region is going through a time of changes. Concretely, efforts towards the realisation of the ASEAN Economic Community (AEC) 2015 are under way, which will result in a common market with a population of over 600 million. This is roughly half of the Chinese population and the creation of a common market will have great consequences for the world economy. This research project is focusing on the impact of AEC 2015 on the automotive industry, which includes vehicle producers and auto parts suppliers. The reason is that the brand-to-brand complementation (BBC) scheme as proposed by Mitsubishi Motors allows the automotive industry to play an important role in the historic development of AEC. The BBC scheme and the ASEAN Industrial Cooperation (AICO), which went replaced by the ASEAN Free Trade Area (AFTA), developed into the present AEC 2015. However, this development is not the only relationship between the automotive industry and AEC. In fact, the AEC is the driving force in the development of the automotive industry. It cannot be denied that the agglomeration of the automobile original equipment manufacturers (OEMs) and the extensive supplier industry are linked to this growth. Moreover, it cannot be doubted that the production of completely built units (CBUs) in various ASEAN member states is based on the use of a system of intra- regional reciprocal parts supply. In short, the automotive industry has been a main promoter and beneficiary of regional integration. Therefore, the research will be limited to exploring the impact of the forthcoming AEC 2015 on the automotive industry. Basing on the latest 2013 available data, vehicle production in the ASEAN5 (Indonesia, Malaysia, the Philippines, Thailand and Viet Nam) countries surpassed 4.44 million units and sales reached 3.50 million units. If we are presuming a 5 percent annual growth rate for production and 7 percent for sales, this would result in 5.90 million produced and 5.60 million sold units in these countries by 2020. In fact, this estimate is relatively moderate as it partly includes the so-called CLMV countries (Cambodia, Laos, Myanmar, Viet Nam), which can be expected to experience a rapid market expansion. If vii