CSM Reports: Rising Consumerism in Asia Supports Automotive Market Optimism But Not Without Bumps in the Road

DETROIT, Nov. 10, 2003 -- Driven by a market in China that is the hottest in the world -- the 3rd quarter of 2003 reached 9.1 percent annual growth rate -- the Asian region as a whole continues to show consistent economic growth. This economic expansion has in turn fueled a rise in consumerism throughout the region, but not without exerting pressures on current economic systems, according to analysis presented by CSM Worldwide.

"A housing boom is underway, and home mortgages and car loans are more prevalent," said Jim Gillette, CSM director of supplier analysis. "With an increase in consumerism, people also have increasingly more options for borrowing money for durable goods." Access to Western brands and viewpoints also has an effect, as does the Internet, and an emerging large-scale, pan- Asian car culture.

Hand in hand with the rise in consumerism is a rise in automobile production and Gross Domestic Product. According to the IMF, the 2003 forecast for real GDP annual percent growth shows a positive story: Japan, 2 percent growth; South Korea, 2 percent growth; Thailand, 5 percent growth; India, 5.5 percent growth; China, 8 percent growth.

The trend overall validates the well-reported opportunities for automotive suppliers and OEMs. Yet amidst the warranted optimism, CSM Worldwide again advised at a briefing held today for auto suppliers, it's important to note a few key risks or "bumps in the road" that should be watched.

Concern over the banking system is a common theme throughout Asia. In China, for example, it's estimated that as much as 30 percent of the $2 trillion in outstanding loans will default. While consumerism is indeed on the rise, the current banking system in China and other Asian countries is extremely fragile and still rebuilding from the currency devaluations of 1997. This is a problem that will compound as Asian currencies gain further strength.

In Japan, short-term GDP is looking up, but deflation is still a problem and consumers are still on the sidelines with retail sales contracting for 29 straight months.

South Korea is currently in a "growth recession," and while they're showing around 2 percent growth in annual GDP, other issues are standing in the way of a full recovery. Consumer spending is weak, especially for durables, demand in the U.S. for Korean-made products is down, and a typhoon in September crippled the port of Busan, the exit point for 80 percent of exports.

Capacity utilization in China is an issue for the short- to mid-term. Domestic demand in the core of the market will maintain utilization over 80 percent, but OEMs not focused on optimum distribution strategies or product homologation will suffer. By the end of the decade, export demand will develop further and should act as a diversification mechanism.

CSM Worldwide supports more than 350 automotive suppliers with global market intelligence and forecasting services. With corporate offices in Detroit, CSM Worldwide covers the global automotive environment from London, Brussels, Frankfurt, Budapest, Sao Paulo, Tokyo, Beijing, Shanghai and New Delhi.