The Hindu Business Line : FTAs in Asia to redefine regional auto market: KPMG

FREE trade agreements (FTAs) being put in place across Asia are set to spark a major shift in the make-up of the region's automotive and component markets.

According to a report recently released by KPMG, integration will be the buzzword in the coming years as numerous firms scramble to establish themselves in the new cross-border business model.

The report said that expectations seem higher than ever before that smaller component manufacturers and indigenous car companies will struggle in the reshaped Asian market, with many companies involved in the region being forced to rethink their strategies.

Speaking about the report, Mr Yezdi Nagporewalla, National Industry Director Industrial Markets at KPMG in India, said: "By the time the decade draws to a close, Asia can be a passenger car market as large as North America or Europe."

He added: "However, the advent of further FTAs and the emergence of major manufacturing centres in places like India and Thailand mean that addressing this market is no longer simply a consideration of how much capacity you pump into China."

According to him, the impact of FTAs cannot be underestimated.

"They may result in an Asia with a number of major manufacturing centres. India, China, and Thailand are already looking to challenge traditional Japanese and Korean auto manufacturing dominance even though those two countries should retain a significant technological edge. Vehicle manufacturers with operations in only one or two countries may become the exception rather than the norm."

Mr Sanjay Upendram, Director of Business Advisory Services at KPMG, said: "For manufacturers able to unlock the synergies of producing in and across the region, the potential benefits are enormous. However, indigenous companies without similar scale may find themselves at a pronounced disadvantage."

He added: "For such companies, the options may be as simple as grow, merge or perish. The Indian market has been growing at a significant rate given its own large market and is therefore fairly representative of the emerging Asian landscape."

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