Demand for mobility driving coachworks industry in Asia

The world population is forecasted to reach 7.7 billion by 2020 with approximately 60% of the global population residing in Asia. However, compared to Europe and North America, the urbanisation rate in Asia is still only expected to be around 50% by 2020. Continued economic growth across Asia will fuel urbanisation and demand for mobility, transforming cities and landscapes. The availability of affordable mass transportation, will play a key part in this transformation.  

Today, in all regions across the globe, buses remain the most widespread mode of public transportation. Global demand for buses is projected to advance at an average annual growth rate of 5.3% to 418,000 new units in 2020. The number of buses in use worldwide is expected to exceed 8 million units by 2020.

The Asia and Oceania region is expected to remain the dominant market accounting for 80% of total production.  

The main trends driving the growth and demand for buses globally include: 

(1)Global population growth and continued urbanization;  

(2)Increasing government investment in public transport networks, particularly bus rapid transit systems; 

(3)Growth in the number of private transportation companies, especially those servicing the tourism industry;

(4)Increasing sales of electric, hybrid and compressed natural gas models; 

(5) Rising personal income increasing passenger expectations towards comfort, safety, and on-board services (e.g., television screens, outlets) that buses offer. 

1.The popularity of public transportation has been driving sales growth of buses in Malaysia and Singapore

Malaysia

At the beginning of this decade, Malaysia experienced GDP growth of 7.4%, while tapering off over the years, GDP growth has remained stable around 5%. Together with Thailand, Malaysia is considered one of the most developed automotive industries in the Association of South-East Asian Nations (ASEAN) and will remain a pivotal market for motor vehicles and parts through to 2020. Total new vehicle sales in Malaysia grew from 660,031 units in 2010 to reach approximately 735,235 units in 2015 (of which approximately 8.6% are commercial vehicles and the remaining are passenger vehicles), at an average annual growth rate of 2.3% from 2010 to 2015.  

Malaysia’s total vehicle sales volume is expected to rise close to 889,400 units by 2020 at an average annual growth rate of 3.9%, as Malaysia’s government policies continue to aim at raising competitiveness and making Malaysia a centre for energy-efficient vehicles.

From 2010 to 2014, buses accounted for an average 2.6% of yearly commercial vehicles sales in Malaysia. In 2015 a total of 63,449 new commercial vehicles were sold, thereof approximately 1,955 new buses, accounting for approximately 3.1% of commercial vehicle sales. Bus sales are forecasted to reach 2,704 units by 2020. 

 

With the lift of Malaysia’s regulatory control in bus fares, on-going infrastructure spending and Malaysia’s government efforts to improve the country’s public transport network, the growth outlook for bus demand is positive.  In addition, the removal of Malaysia’s government fuel subsidies, which will encourage the use of public-transport, is expected to boost bus sales as well.

Due to the expected increase in bus sales over the next 5 years, the coachwork industry is expected to grow in tandem to meet the demand for new buses.  Thus, it is expected that the coachwork manufacturing industry will grow from MYR551.7 million (approximately USD148.1 million) in 2015 to reach MYR763.1 million (approximately USD230.8 million by 2020), at a CAGR of 6.7%.

Singapore

Singapore’s economy is widely known as an open and successful free market economy.  Its economy is based on a proactive approach to attract foreign investment through trade liberalization and a highly skilled workforce. At the beginning of this decade Singapore’s GDP was growing at 15.2%, however as this decade closes out Singapore’s economy has slowed down considerably. Rebounding from a low 2.0% GDP growth in 2015, Singapore is forecasted to finish the decade with GDP growth slightly below 3.0%.  

Singapore new vehicle sales grew from 52,737 units in 2010 to reach approximately 78,609 units in 2015, at an average growth of 5.2% per year from 2010 to 2015. However, the government of Singapore aims to control congestion in the city state by imposing vehicle quotas and reducing the number of cars on the road. For instance, on the 23rd October 2017, the Land Transport Authority (LTA) of Singapore announced that it will lower the vehicle growth rate from 0.25% per annum to 0% from next year. Thus, vehicle sales are expected to decline close to 47,900 units by 2020 at an average growth rate of -9.4% per year.

The government of Singapore has continuously adopted the Vehicle Quota System and the Certificate of Entitlement quota to control vehicle volume, while at the same time improving the public transportation system and encouraging residents to use public transportation. 

Bus utilisation has grown at an average of 4.3% per year from 2010 to 2014 and it is expected to increase continuously in the future. Total new bus sales are expected to increase to 2,214 units in 2020, implying an average growth rate of 4.3% from 2016 to 2020. 

Overall Singapore’s automotive industry makes only minor contribution to the country’s economy. The market size for coachwork manufacturing in 2015 is estimated to value S$133.1 million (approximately USD96.3 million).

2.Competitive Landscape

Malaysia

The market for bus manufacturing is fragmented and competitive. With the market being fragmented, industrial players are continuously ‘competing’ against each other to increase their market share by improving skills, technology and services provided to meet the demands of the growing industry.

Bus body manufacturers represent a significant portion of the market size in the industry. In 2014/2015, more than 50% of the coachwork manufacturing industry value was attributed from the works and manufacturing of bus bodies.

There are about 23 registered bus body manufacturers in Malaysia, of which 12 are involved in coachwork manufacturing. In 2015 the top five coachwork manufacturers in Malaysia accounted for roughly 31% of the total market value for coachworks. It is estimated that the largest company for coachworks in Malaysia has a 17% market share of the total market value for coachworks. 

Singapore

Local bus manufacturing in Singapore faces stiff competition from foreign bus manufacturers, particularly European brands. Singapore’s local bus manufacturers are also facing increased competition from Chinese imports because of their significantly lower cost. The two public transport companies in Singapore, SBS Transit and SMRT Corp primarily purchase foreign bus brands, specifically from brands that are assembling in Malaysia.

Assemblers in Singapore generally import bus chassis, upon which they fabricate bus bodies and assemble them locally or at their designated factories. Buses and coaches assembled in Singapore account for approximately 10-15% of the total annual new buses sold in the country.

3.China Snapshot

China remains one of the world’s largest automotive markets and automotive manufacturing countries since early 2010.  In 2015 total production and sales of vehicles both exceeded 20 million units. A total of 3.5 million units of new commercial vehicles were registered in 2015 compared to 3.8 million units in 2014. However, the demand for commercial vehicles in China is expected to slightly decrease moving forward as the Chinese government is taking the country’s growing air pollution problems more seriously. 

The production of buses in China is likely spurred by the production of electrical buses and the total production of buses will increase from 593,400 units of buses in 2015 to approximately 913,000 units in 2020, at an average growth rate of 9.0% per annum from 2016 to 2020.

China’s bus market and bus manufacturing industry are the largest in the world, and appear to offer many opportunities for global players. However, unlike its car market, China’s bus industry is home grown.  Although demand for buses in China is expected to increase by 9.0% over 2016 to 2020, opportunities for foreign companies remain low.

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