Moody’s Investors Service says that Thailand will remain the dominant carmaker in ASEAN for the foreseeable future following the establishment of the ASEAN Economic Community (AEC) in 2015.
However, the region faces competitive threats from the fast-developing Indian and Chinese car markets.
Moody’s analysis is contained in its latest edition of Inside ASEAN, a quarterly publication looking at major credit trends prevalent in the Southeast Asian region.
“With the establishment of the AEC this year, Thailand’s position as the largest producer of cars in ASEAN is potentially under threat, as other countries, for example Indonesia, with traditionally domestic market focused car assembly operations, seek a larger slice of the regional market,” says Alan Greene, a Moody’s Vice President and Senior Credit Officer.
However, the biggest risk to Thailand’s—and ASEAN’s—auto sector is from outside the region, says Moody’s. China’s car industry is currently building over 24 million vehicles per annum, and India’s 700,000 exported vehicles in 2014 came close to Thailand’s total 882,000 in exports in the same year.
Moody’s also notes that all major carmakers have entered India to sell locally and also to establish a manufacturing presence to supply their global export markets.
Elsewhere in the region, Moody’s notes that lower fuel costs will keep electricity tariffs in Malaysia low over the next 12 to 18 months, given the rating agency’s outlook for weaker thermal coal and crude oil prices.
In addition, coal will be the main source of fuel—at 53%, from 45% in 2014—in peninsular Malaysia by 2017, says the rating agency.
This shift will further reduce costs for utilities and support the lower electricity tariff in the longer term.
Inside ASEAN also examines sukuk volumes in Malaysia that are driven by corporate and sovereign refinancing, and discusses how Indonesia’s Islamic finance roadmap will help drive both the bank consolidation and sukuk market growth.