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Published on 07/03/2011

Thailand vehicle production and sales still the highest in ASEAN but fast rising Indonesia could pose a challenge

The nickname ‘Detroit of the East’ isn’t that apt after all, since Thailand isn’t just the regional hub for American brands GM and Ford, but host to most of the big Japanese automakers as well. Toyota, Honda, Nissan, Mitsubishi and Mazda all produce and export vehicles from our northern neighbour. How big actually is the auto industry in Thailand? Last year, auto exports contributed about 13% to the kingdom’s total exports of 6.18 trillion baht, which means it’s the second biggest sector after electronics and computer parts, according to data from the Commerce Ministry. The auto industry accounts for 12% of Thailand’s GDP, said the World Bank.

The ongoing political situation that occasionally flares up, as it did in the first half of 2010, doesn’t seem to affect the sector either. Car output was unaffected; although 20% less than 2009, auto makers still poured in about 32.5 billion baht ($1.1 billion) to Thailand in 2010. Some are expecting a rebound. “The flow of FDI this year is expected to be as high as 400 billion baht ($13 billion), with automotive and parts being a key sector, led by number one investor Japan,” said BOI Secretary-General Atchaka Sibunruang. The country’s Eco Car program is a success. Mitsubishi is spending 16 billion baht ($535 million) to build its new Global Small Concept that’s due to roll out in 2012 (from a third factory in Laem Chabang, Chonburi), Honda’s Brio is launching this month, while Nissan’s Thai made March is selling very well. Outside of the Eco Car, Ford is building a new plant for its new Focus and GM has a diesel engine plant that will bear fruit soon.

Low wages, strong infrastructure and a good habitat are Thailand’s strong points. According to the International Labour Organisation’s 2009 report, average wages for manufacturing workers in Thailand is $245.50 per

month, compared to China’s $412.50 and Malaysia’s $666. It’s not just about exports, as Thailand is also the biggest market in ASEAN – 800,357 vehicles were sold there in 2010, compared with Indonesia’s 764,088 and Malaysia’s 605,156. “You have a good supplier network. You really have a lot of experienced suppliers across the board so there’s a potential to really localise a lot. The fabric is there. You can’t just drop an assembly plant into nowhere and think that cars would just magically pop up. There has got to be the right environment that brings high-quality cars,” commented Martin Apfel, GM’s ASEAN boss.

If there’s a regional threat to Thailand’s auto crown, it’s Indonesia. Average wage wise, it’s just $129 per month according to ILO, which is almost half that of Thailand’s. And unlike Malaysia’s relatively saturated market, there’s plenty of room to grow in that highly populous nation – TIV is estimated to be 800,000 this year. Growing affluence also means thatIndonesia could soon overtake Malaysia as the region’s biggest consumer of passenger cars – 541,475 units were sold there in 2010, only just behind Malaysia’s 543,594. Some analysts say Indonesia could overtake Thailand as a regional manufacturing hub by 2014 because of strong economic growth, growing national wealth and a more stable currency. We’ve already seen companies like Nissan commit money to double production in Indonesia, and Audi setting up local assembly for the A4 and A6. More recently, Daihatsu announced a 20 billion yen investment to build a new plant in Indonesia for a compact low cost car.

Will Indonesia’s auto industry gather enough steam to challenge Thailand’s status as the Detroit of Asia? Since Malaysia is out of the competition, we’ll just enjoy the match from our centre seat!

Thailand : the highest in ASEAN  

MDA consulting SEA

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