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Implementation Of ASEAN Economic Community To Reduce Big Japanese Automakers' Dominance In The Region, Says Frost & Sullivan

"The low level of motorization in ASEAN indicates a strong growth potential, while the heavily motorized markets of Western Europe and North America represent a saturated replacement market," Dushyant said.

He added that the BRIC markets, led by China and India are the largest competitors for ASEAN in terms of market and investment. Their attractiveness stems from their larger market size and larger economies. As an integrated market, ASEAN will be more competitive and a better match to the BRIC economies, he added.

"Smaller markets, with their individual automotive sectors, will continue to be plagued with issues of productivity and efficiency. Sector integration will lend economies of scale which in turn will help reduce costs and improve competitiveness," he added.

Dushyant also said that the capital intensive nature of the automotive sector, coupled with the ever increasing competitive pressures, pushes for increased investment, both technical as well as financial, for the local industry to remain competitive and globally relevant.

He added that an integrated automotive sector will enhance ASEAN's attractiveness as an investment destination and help the local players, plagued with limited resources, to survive.

However, Dushyant said that political compulsions, accentuated by development divide serve as key restraints for the implementation of AEC.

He also said that local OEMs will find it challenging to maintain their existing market positions and some degree of consolidation is expected.

He added that automotive OEMs and suppliers should focus on increasing value and reducing cost of safety systems.

Dushyant said that within the automotive value chain, suppliers as a whole are better "hedged" to weather the impact of AEC due to their multi-client share of OE business and opportunities in the aftermarket segment.

He said that under the full implementation of the AEC, a structural change is likely in the automotive sector. "Local players, both OEMs and suppliers, stand to lose the most. Overall, market concentration is set to decrease," he added.

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