Thursday, 26 November 2015

TPPA promises accessibility to wider automotive marts


It all began in 2005 when four countries, namely; Singapore, Chile, New Zealand and Brunei, that signed a trade agreement known as the “Trans Strategic Economic Partnership Agreement (TPSEP)”.
The agreement later attracted the industrial powerhouse such as Japan and the USA interests to enter the trade pack, and has grown to include the twelve participating countries to form the Trans-Pacific Partnership Agreement (TPPA).
The negotiations that began in 2010 took five years to conclude in October 2015. TPPA thatACCOUNT for some 40 per cent of the global GDP may take at least two years to begin its implementation upon domestic approvals by various participating countries.
TPP aimed at enhancing market access opportunities for its member countries to improve their respective competitive advantage, and at the same time provides a platform to develop transparent rules and discipline that will create investor confidence in all member countries.
These in turns promote opportunities for skills and technology transfers between participating countries, which will result in enhancement of competitiveness in many aspects of trades and productions.
Analysts are of the opinion that the opportunities provided by the agreement with respect to trade liberalisation and removal of exports barriers would make it easier for companies within the participating countries to export their goods to other member countries.
Six out of the twelve TPP members are automotive producers with Total Industry Volume (TIV) more than 500 thousand cars per year, with USA and Japan being the biggest producers with annual TIV of about 12 million and 10 million respectively (Only passenger cars).

The US vehicles trade being the largest totaling above USD350 billion annually but facing trade deficit in the billions. Japan on the other hand is enjoying positive trade exceeding USD100 billion. The USA imports largely passenger vehicles and parts and components with annual value at about USD150 billion and USD60 billion respectively. Almost all of the automotive related TPP economies are growing positively inTERMS of their respective TIV for the past 5 years.
Malaysia’s main exports consist of parts and components primarily to Japan and the USA. However exports of parts and components to Japan had reduced by 16% from 2012 to 2014.Exports of Parts and components to the USA increased by 6% from 2012 to 2013 but reduced by 9% from 2013 to 2014.
The nation main automotive imports are passenger vehicles, parts and components and commercial vehicles primarily from Japan. However, in the last three years the import trends seem to be reducing in all the three vehicles segments. Used passengers vehicles seems to be the main import activities by the local vehicle importers.
The importation of passenger vehicles had reduced by 51% from 2012 to 2014. Similarly, the imports of Parts and components and commercial vehicles had reduced by 26% and 31% respectively from 2012 to 2014.
Availability of production volume is key to the survival of any the automotive manufacturing endeavours. Continuous pressure to liberalise the automotive home market has dwindled the sustainability of many of the local parts and components manufacturers as well as home grown automotive assemblers.
TPPA promises the removal of exports barriers would make it easier for Malaysian companies to export their goods to various member countries and thereby enhancing their respective production volume.
It is still too early to foretell the positive impact that TPPA would bring to the local automotive players but the above TIV statistics demonstrate the vast market potential for local automotive players to exploit through TPPA.
As the saying goes - The best way to predict the future is to invent it. Henceforth the local automotive players must now focus on enhancing their efficiency to ensure their competitiveness to participate in the forthcoming automotive production potentials and challenges.

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