On a 20-year-old map of the automotive world, Asia simply would consist of one small island nation.
In 1980, Japan was it, a supplier to Asia and perceived as a threat to the rest of the world's automakers. Asia still revolves around Japan, but countries such as Korea, Thailand, Malaysia and India are finding a place on that automotive map.
In the next 20 years, Asia is poised to become a very different place for the world's automakers. The continent's smaller countries will play a strong role for the industry on a global scale, as the world's automakers begin to see Asia not as a threat, but as a land of opportunity.
The devastating financial crisis of two years ago left Asia's automakers with overcapacity and underproduction. But some of the hardest-hit countries, particularly Korea and Thailand, now are hoisting themselves out of the economic slump and leading the continent's recovery.
Experts say reforms, including the creation of more flexible economies and opening doors to trade and foreign investment, are here to stay, reducing the likelihood of future financial crises.
Use of new technology can help local carmakers overcome geographic boundaries. An early example comes from South Korea's Daewoo Motor Co. Ltd., which is selling the Matiz exclusively over the Internet in Japan. This allows Daewoo to test the Japanese waters without the expense of setting up a sales and distribution network.
Korea, the only Asian country other than Japan with truly global automakers, is in for big changes over the next couple of decades. The financial crisis there posed a challenge to the viability of the chaebol, or conglomerate, system.
The near-bankruptcy of Kia Motors Corp. in 1997, eventually absorbed by Hyundai Motor Co. Ltd., sent the country into a tailspin. Today, the once-powerful Daewoo Group is being dismantled by its creditors in order to avert bankruptcy. Corporate reforms are slow; however, it is agreed that the unwieldy chaebol must give way to a more efficient, less vulnerable system.
Despite economic woes, Hyundai and Daewoo are positioned for success. The number of vehicles in the nation has grown from a 1989 level of 2.6 million to a 1998 level of 10.5 million. And with one car per 4.5 people, there still is plenty of room for growth.
Currently, imports account for less than 1% of sales in Korea, due to historically high tariffs and nationalistic sentiment against foreign brands. As Korea's market continues to open up, Japanese imports are entering the marketplace. Because of domestic loyalty, forecasts say that foreign sales will make up only 5% of the total market in 10 years.
Thailand, which has no domestic auto industry of its own, is known as "The Detroit of the East," due to all the foreign automakers that have set up shop there. Toyota Motor Corp., Mitsubishi Motors Corp., Isuzu Motors Ltd., Ford Motor Co./Mazda Motor Corp., Honda Motor Co. Ltd., General Motors Corp. and BMW AG all are manufacturing vehicles - mostly pickup trucks - on Thailand's eastern seaboard.
In 2000, Thailand's annual capacity is estimated to be 780,000 vehicles (see chart). Thailand is an attractive site because, unlike many Asian nations that want to protect domestic manufacturers, there are few manufacturing restrictions such as high local-content mandates.
Automakers also like Thailand because it is centrally located and has solid relationships with other important Asian nations. GM, for example, aims to export 75% of Opel Zafiras made at its new plant in Rayong. Thailand will strengthen its hold as a production and export center as automakers see potential beyond the pickup truck and begin car production here as well. Ford and Mazda recently announced plans to add a car to their truckmaking operations.
Malaysia, also rebounding nicely from pre-crisis economic levels, falls on the opposite end of the spectrum from Thailand. National automakers Proton and Perodua in 1998 accounted for 80% of the domestic market but have little luck in exports. Industry watchers say to look for a merger between Proton, which soon is to be acquired by national oil company Petronas, and rival Perdoua, in order to achieve economies of scale. If this occurs, the national makers should be able to retain their hold on the bulk of the nation's auto market.
India, the world's second-most populous country, attracts the global automakers with its sheer growth potential. In fact, due to the 1 billion population, experts predict a capacity shortage in the medium-term, despite current overcapacity. If buying rates here reach just 0.25% in 20 years, annual demand would exceed 3 million vehicles.
Indian automaker Maruti Udyog Ltd., which in 1998 claimed an 80% market share, already is losing its grip to foreign makers, which vow to stay for the country's long-term prospects and export potential. In the most recent quarter ending in September, Maruti's share had dropped to 69% of the some 126,500 vehicles sold.
Korean automakers now are making a strong showing in India. Hyundai's third-quarter sales came in second place, at 12,736 and 10% of the market, and Daewoo is leading in customer satisfaction surveys. International competition currently comes from Ford, Daewoo, Hyundai, Fiat SpA, Toyota and Honda.
Although most of Asia is opening up, nobody says it's going to be easy.
"Prepare for a fight. Think marathon, not sprint," advises Keith A. Davey, director of Ford's business strategy for Asia/Pacific Operations.
Sound advice - because as automakers explore Asia, they should keep in mind it is far more rewarding to participate in a marathon than to win a 100-yard dash.