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February 2, 2009

Global crunch to hit Asian car markets in 2009
Asia's auto industry faces a dramatic slowdown in 2009 as the global financial crisis puts the brakes on sales, with Japan and Korea hit hard by weakening demand in the United States and Europe.

The region's car industry has boomed in recent years as the newly affluent middle-classes snapped up vehicles that have clogged the streets of capitals from Bangkok to New Delhi, reported AFP.

But the threat of recession, together with plummeting consumer confidence and the global credit crunch, which has made it difficult to obtain new vehicle loans, has seen gloomy forecasts posted for 2009.

"The industry is in crisis mode across the world," said Ashvin Chotai, managing director of Intelligence Automotive Asia. "I'm expecting about an 11.8 percent decline in 2009 in all Asia for light vehicle sales. That is an incredible decline, probably on a scale worse than the sort seen during the Asian crisis."

Chotai said that during the 1997-98 regional financial meltdown, China and India -- which are now huge car markets -- were not substantially affected. "But this year what is incredible is there's hardly any country in the world that's going to grow in auto sales," he said.

While domestic sales are down right across the region, the major exporting nations will bear a double burden.

"The maximum impact will be on Japan and Korea because they export a large number of cars to the US and Europe," said Vivek Vaidya, automotive analyst at consulting firm Frost & Sullivan.

In Malaysia, Southeast Asia's biggest passenger car market and home to the Proton national car, vehicle sales are tipped to fall 12.4 percent in 2009 after 12.5 percent growth in 2008.

In Thailand, domestic auto sales are expected to dip more than 15 percent in 2009 while exports could slump by 26.6 percent. Toyota, Honda and General Motors have factories in the kingdom, and the industry accounts for about 16 percent of GDP.

Despite the gloom, the worst of the fallout is expected to be over by the end of the year, when the players who have survived the crisis can expect to begin a modest recovery.

Vaidya, from Frost & Sullivan, said that low-cost and increasingly high-quality manufacturers in China, India and Southeast Asia could benefit as auto-making shifts away from high-cost centres.
"In the long term, production is moving towards Asia and that will accelerate in the economic downturn because companies in the US and Europe will be forced to close down factories there but will need production anyway."

"There are clouds but there is a thick silver lining around it.... Asian players will actually benefit," he said.

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