Outlook bright

GREY MARKET

Outlook bright

The grey market for imported cars is changing in tandem with consumer behaviour and new legal regulations

Published on November 29, 2007

In the face of restructured excise taxes for automobiles and the rising cost of petrol, car importers in a grey market have been making adjustments to favour smaller cars.

The reduced tax on small cars was approved as a measure to promote fuel-saving vehicles.

The future trend is now clear, as consumers grow increasingly fond of small fashionable cars that boast a sporty look. Recently, up to 3,000 Honda Jazz models have been hitting the streets each month due to the number of city residents on the lookout for a handy and fuel-saving vehicle.

Automobile importers and distributors seem delighted with this trend as it bodes well for the largely untapped market for small cars.

Taweechai Pongphandecha, the CEO of Revo Company, which imports and markets Japanese vehicles, said his company had been looking for fresh impetus for six months before they clicked on the fact that the small or city car was in vogue. He predicted three future trends.

First, customers want flexible or tailor-made vehicles and services. Options vary from sound systems and radios to other accessories. Until now, the vast selection of options has been exclusively restricted to luxurious cars (which is perhaps why consumers with lower disposable incomes get such a kick out of retrofitting their hot hatches at home).

However, choice is going to play an important role in future car-purchasing decisions. Customers no longer regard the vehicle's performance as the main criteria, because city traffic hardly puts this to the test. Today, customers buy cars that best match their lifestyle. In an increasingly popular trend, owners equip their cars with exterior and interior accessories to express themselves.

Second, customers will go for smaller cars because they consume less fuel and have fewer excises levied on them. On the production front, auto-makers in Japan, Europe and the United States have already begun churning out more small city cars each year.

The Thai government has thrown its support behind the trendy new auto segment. Under its "Best Little Car" project, the government encourages auto-makers to market city cars across a broader spectrum.

In response to this trend, Revo Company started importing a range of smaller Japanese models, including the Toyota Sienta, Honda Porte and Nissan Cube.

Third, the market for energy-saving or hybrid vehicles will grow because the recent adjustment of car excises also favours cars in this category. As a result of the excise cut, importers have been able to import hybrid vehicles for less cost. Though cars in this category are still relatively expensive, the lower tariff opens up fresh business opportunities by encouraging customers to consider hybrid vehicles as an economical alternative in the face of escalating petrol prices.

Furthermore, projects to downsize the engines of large vehicles are already underway. In the future, the size of a semi-multi-purpose vehicle's engine may only be 1,000cc instead of 1,800cc.

The above trends have also attracted the attention of giant automobile companies, which react in the same way as grey-market entrepreneurs. This will inevitably lead to greater competition between the major players and the smaller companies, especially in the field of hybrid vehicles.

Until now, grey-market companies have viewed the hybrid segment as one of their major selling points because the Goliaths of the auto-manufacturing world have never taken the market seriously before.

Companies are targeting students and those just stepping onto the professional corporate ladder, who have active lifestyles and command purchasing power.

City cars are also likely to be attractive to these social groups on the grounds of their cost, convenience and fashionable status.

To further hype this last point, car-modification services for the brand new models are becoming a new staple.

Grey-market entrepreneurs are also starting to offer car-modification services for used cars. To erase any lingering doubt about quality, businessmen are offering one-year warranties or guarantees of up to 20,000 kilometres. They now store more spare parts to accommodate clients' demands.

At the same time, some grey-market entrepreneurs have positioned themselves as specialists for each segment, from high-end to mass production.

The grey market for imported cars is without doubt changing in tandem with consumer behaviour and new legal regulations.

An analysis of the automobile industry indicates that it is increasingly starting to resemble the cell-phone market, with products being marketed in ways more closely integrated into people's lives.

Watchiranont Thongthep

The Nation