Driven by Abenomics and Diminishing Growth Opportunities in Core Markets, Japanese Carmakers Look to ASEAN and MEA

During a business trip to Japan towards the tail end of 2013, the ASEAN and MEA regions were of recurring interest to the country’s carmakers. The fact that new car sales at home are in a long-term downward spiral would be enough alone to understand Japanese OEMs’ keen interest in developing new markets. However, this interest is also driven by limited growth opportunities in Europe, North America and even the BRICs as well as the positive impact of Abenomics.

New car sales slumped even further in Europe in 2013 and any recovery in the region still remains fragile. Furthermore, North America sales growth is expected to decelerate in 2014 and even the BRICs are offering no respite – new car sales actually fell in Brazil, Russia and India in 2013 and growth prospects are subdued in 2014. The bright spot for many carmakers therefore is China, where total vehicle sales climbed 14% to nudge 22 million units in 2013 according to the CAAM (China Association of Automotive Manufacturers), but Japanese brands missed out as many Chinese consumers shunned Japanese cars because of the territorial dispute over the ownership of the Senkaku/Diaoyu islands. In an automotive markets context alone, the focus on the new horizons of ASEAN and MEA is perfectly understandable but the election of Shinzo Abe and the combination of easier monetary policy, fiscal expansion and promises of deeper structural reforms have significantly improved the outlook for Japan, further supporting the keen interest in foreign markets among Japanese carmakers.

Japanese brands are already well established across the ASEAN region compared to most international players but their presence is patchy across the Middle East and Africa. One interesting perspective from my discussions in Japan is that, despite low fuel costs and higher incomes, there is a market opportunity for affordable Japanese cars in the Middle East as well as in Africa’s poorer nations. After all, not all foreign citizens in the Middle East are employed in high-paid roles in the finance or oil sectors. On this subject, I thought it interesting to highlight the sheer number of foreign citizens in selected Middle Eastern nations in both volume terms and as a percentage of the total population.

Foreign Citizens in the Middle East, Millions, and Percentage of Total Population in 2014

Source: Euromonitor International