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ROBUST AUTOMOTIVE SECTOR SEES EVEN MORE MAJOR INVESTMENTS (July 2010) Investor confidence in Thailand’s automotive industry is as strong as ever after an unveiling of major projects by leading auto companies in recent weeks. The explosion of new investment in an already robust sector is pushing the country closer to the goal of being a global Top 10 automaker by 2014, when local capacity is projected to hit 2.3 million units. The furry of investment announcements in late June and early July started with the Ford Motor Company revealing plans to build a 15 billion baht (US$450 million) state-of-the-art passenger car plant in Rayong province. The 750,000sqm factory will start production in 2012, with an initial capacity of 150,000 units. Joe Hinrichs, group vice president and president of Ford Asia Pacific and Africa, said the new project underscores the company’s long-term commitment to Thailand. “The decision to build our new plant was supported by Thailand’s worldclass automotive industry and logistics and export infrastructure,” he remarked. Toyota Motor Thailand also recently announced that it will invest 4 billion baht to expand its Chachoengsao province plant to 200,000 units per year, as current capacity cannot meet rising demand. One of the plant’s key lines will be the socalled innovative international multipurpose vehicle or IMV. Becoming the third major automaker to unveil expansion plans within a period of just two weeks, Mitsubishi Motors Corp. revealed intentions to build a 15 billion baht eco-car manufacturing plant in Chonburi province. This represents the company’s largest ever investment in Thailand and its biggest facility outside Japan. The plant eventually will have an annually capacity of 200,000 small fueleffcient and eco-friendly cars, with production scheduled to begin in 2012. “Thailand will be our export hub for the Global Small Car,” Osamu Masuko, president of Mitsubishi Motors, said to the local media. Strong and Mature The Thai auto industry has grown from its infancy with just one automotive assembly plant in 1961 to a mature world- class production center currently ranking 13th globally. Nearly all of the world’s major automakers, assemblers, and parts and components manufacturers have established production operations in the country. In fact, Thailand produced more than 1.4 million vehicles in 2008,


and the lions share came from the local facilities of Ford, General Motors, BMW, DaimlerChrysler, Mitsubishi, Mazda, Toyota, Isuzu, Honda and Nissan. The country is well l on the way to achieving performance goals set by the Thai government in a master plan formulated in the past decade for the automotive industry’s development. This includes substantial progress toward becoming Asia’s automotive production base, gaining global competitiveness, reaching output targets for passenger cars, pickup trucks and motorcycles, and achieving international recognition as a center for replacement equipment manufacturing or REM parts. The Thailand Automotive Institute predicts that the country will pass Spain, Canada and Mexico to enter the world Top 10 by achieving the capacity target of 2.3 million units in five years. Further growth and development will be spurred by the free trade agreements (FTAs) with countries such as Japan, China, South Korea, Australia, New Zealand and India. Bright export prospects also exist as ASEAN member countries knock down their duty barriers toward integration as a single market. The whole of Asia, in fact, offers opportunities as the region is expected to account for 40% of growth in the automobile industry over the next seven years. Thailand’s Many Advantages Automotive manufacturers are attracted to Thailand for many reasons. Geography is a benefit with the country serving as a gateway to markets across Asia. Its many FTAs offer local producers competitive advantages, and the friendly Thai people themselves are a plus representing a highly skilled, hard working and reliable workforce at low cost. Further, the country has many industrial estates that focus on the automotive industry and provide sophisticated facilities for manufacturers. High-level support is also vital, with the Thai government pushing the prosperous advancement of the country’s automotive industry, which contributes heavily to national economic health. “The government’s consistent policy for the automobile industry plays an important role in the development of the Thailand automotive sector,” Mitsubishi’s Masuko said. He made the comment in early July at a ceremony marking the Japan-based auto giant’s achievement of 2 million vehicles made in Thailand. Representing one of the initiatives receiving substantial support, eco-cars are on the verge of rolling off Thailand’s assembly lines. The Board of Investment and Ministry of Finance are actively promoting eco-car development in the country, with no fewer than six global auto assemblers having proposed investments totaling an annual production capacity of 675,000 eco-cars.


In fact, fuel efficiency with environment friendliness is a dominant trend in the Thai auto industry right now. The Ministry of Energy is promoting fuel-efficient transportation through a natural gas vehicle initiative. So far more than 10,000 natural-gas-powered taxicabs and related NGV subsidies have been introduced through national energy provider PTT Public Company, Ltd. Growth opportunities also exist with E85 ethanol. Strong Parts and Components Parts and components are another vibrant sector in the Thai auto industry. The Japan Automobile Manufacturers Association describes the quality of Thailandmade automotive parts as the highest of any ASEAN nation. Local parts manufacturers supply nearly 100% of the requirement used in the assembly of motorcycles, about 85% of parts used in pickup truck assembly, and as much as 70% of those for passenger cars. Demand for Thailand-made automotive parts is growing. In response, there are already approximately 2,390 such suppliers in the country, of which about 700 are OEMs or original equipment manufacturers. Since all major Japanese automakers have opened manufacturing sites in Thailand, many of their parts manufacturers such as France’s Valeo, Germany’s Bosch, U.S.- based TRW, Britan’s GKN and Japan’s Denso, Mitsuba and Mitsubishi have followed suit to serve their customers. Thailand’s exports of auto parts could expand by as much as 22% this year to a value of 400 billion baht. Fresh investment will only accelerate the pace of growth in the future. In one key project, Thai Bridgestone Co., Ltd. this past February opened a new center for the production of retread tires. Located in Saraburi province, northern Thailand, the plant will help the Japan-based Bridgestone Group meet rising demand for retread tires in the home country, China and elsewhere across Asia. The Thai factory is targeting truck and bus tire customers. The domestic market and local manufacturers are importing nearly 250 billion baht worth of auto parts and components on an annual basis.


Stellar Segments Besides intensive passenger car production, Thailand also boasts a stellar status in the pickup trucks segment. The country could rightly be called the world’s factory for the line. Thailand ranks No. 1 globally for production of 1-ton pickups and No. 2 after the United States when including 1.5-ton models. To boost its position in the Thai market’s pickup segment, Japan- based Isuzu is introducing its MU-7 Groove-Limited Edition model featuring a sporty design and special accessories. In the motorcycle sector, Thailand produces more than 1.6 million units annually. Family models account for 94% but sport models are seen as having potential for growth. The local market is already saturated, however, and analysts urge makers to come up with innovative new models to stimulate sales. But Thailand is more than a bustling production base. Several foreign makers also appreciate the country as a prime location for auto R&D investment. In one example, Toyota has established a sophisticated technical facility here to conduct work on product design, testing and evaluation, and to develop embedded software for automotive applications.


Automotive Industry