Asia's Booming Car Market Fueled by Easier Financing

Ron Corben
Voice of America
August 19, 2003

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Auto sales throughout Asia are booming as most markets record double-digit growth. But, the growth has led to calls for more investment in public transportation to ease traffic gridlock and pollution.

In Asia, car sales are booming. Economic growth, trade liberalization and low interest rates are pushing sales across the region.

In China, the world's fastest growing auto market, sales gained even during the SARS outbreak earlier this year, as people chose private rather than public transportation.

Last year, China's car sales rose 56 percent to 1.1 million vehicles.

The sales picture is much the same elsewhere in Asia. Philippine car sales are up nearly 20 percent while in Vietnam buyers have lifted sales 40 percent this year. Passenger vehicles sales in Thailand are up 36 percent.

For much of the region, the boom is linked to the recovery from the Asian economic crisis that began in 1997. The crisis forced most of the region into recession, and car sales plummeted. Now, in Southeast Asia and China, the middle class is growing, and is increasingly eager to spend money on things that once were luxuries for the wealthy - cars.

Tim Dunne, with the consultancy Automotive Resources Asia, said reforms that make it easier to borrow money to buy a car are fueling the boom in Thailand and China.

"The major reason is financing - vehicle financing - especially in China where I think year-on-year sales are up over 60 ... almost 70 percent in passenger cars or vehicles that are used for personal transportation," Mr. Dunne said.

Sales may rise even more in the region over the next several years, as the ASEAN Free Trade Area agreement goes into operation. The agreement means that cars made within the Association of Southeast Asian Nations will face lower tariffs in ASEAN countries - becoming more affordable.

In the global auto market, Asia is now the brightest hope for growth. Analysts see little real expansion for mature markets such as Europe and the United States.

But all this growth has drawbacks.

The Asian Development Bank has warned that vehicle emissions are worsening already thick air pollution in much of the region. In Thailand, the Pollution Control Board points out that chronic noise pollution from cars in Bangkok is damaging the health of many in the city.

For drivers, the most aggravating problem may be congestion - too many cars crowding onto too few roads.

The ADB has called for an integrated strategy of improved emissions standards, cleaner fuels, vehicle inspections and efficient transport planning to reduce the harm from autos.

Some headway is being made in Thailand. An elevated rail system opened in 1999 and is easing road congestion.

The train's chief operating officer, Paul Anderson, says the rapid growth in car sales highlights the need for balance between private car ownership and public transportation needs.

He said Hong Kong and Singapore have worked to strike that balance. "If you look at Hong Kong, where they have heavily invested in mass transit over the last 20 years they're looking at about 40 percent of their public transport trips by rail and Singapore is looking at the order of 50 percent," he said.

But Bangkok is still catching up. Next year the city will open its first underground rail network. In the meantime, Mr. Anderson fears a return of the traffic gridlock seen in the economic boom years of the early 1990s.

"We now see Bangkok - the auto industry's developing very rapidly - and the car population is increasing from about one million up to 1.5 million - that's a bit frightening," he said.

Analysts say Asia's growing love affair with the car creates a challenge for the region's governments.

They will need to struggle to balance between car ownership and public transportation to ensure that economic growth and rising incomes do not simply translate into more traffic congestion and more pollution.