Author: CHUNG Yoon Ngan
Date: 05-12-12 06:04
Thai industry survives floods
By Karl Wilson
May 11, 2012 - 12:45pm http://www.chinadailyapac.com
In less than a decade Thailand has become the pickup truck capital of the world and the auto hub of Southeast Asia, earning itself the reputation of being the Detroit of Asia.
Despite last year’s devastating floods, which cut production by more than 50 percent, Thailand has bounced back and the assembly lines are back in business churning out more cars than ever before.
Last year Thailand still managed to produce around 1.8 million vehicles. This year, it expects to hit the two million mark.
With less than 70 million people and less than 15 percent of the population owning cars, it has done remarkably well in developing an automotive industry.
Much of that is down to investment by Japanese, American and European manufacturers.
Most of the production is for the export market, says Suparat Sirisuwannangkul, chairman, Federation of Thai Industries’ Automotive Industry Club.
“Thailand’s strength is that it is a base to assemble pickup trucks and spare parts, with markets large enough to support car supply and to produce automobiles at cheaper prices,” Suparat said recently.
He said Thailand also benefits from having good infrastructure and, despite the politics, long-term government policy that supports the industry.
However, the industry still depends heavily on foreign manufacturers for technology, he conceded. Foreign manufacturers continue to pour millions into Thailand’s auto industry.
Last month, US auto giant Ford announced its new $450 million plant at Rayong, east of the Thai capital, will open soon, boosting its production by a further 150,000 units a year, taking Ford’s annual capacity in Thailand to 445,000 vehicles.
Ford also intends to make Thailand its regional hub for exporting cars and trucks to countries within the Association of Southeast Asian Nations (ASEAN), New Zealand and Australia.
The Thai auto industry has grown from just one automotive assembly plant in 1961 to a mature world-class production centre.
Nearly all of the world’s major automakers, assemblers, and parts and components manufacturers have established production operations in the country.
The Thailand Automotive Institute predicts Thailand will surpass Spain, Canada and Mexico to become the world’s top 10 automakers by achieving the target capacity of 2.3 million units in five years.
Nissan is to relocate its regional headquarters from Singapore to Thailand to strengthen its business in the region, the company said.
According to economist and associate professor Biswajit Nag of the Indian Institute of Foreign Trade, Thailand owes its success as an automotive manufacturing centre to the Japanese.
“It is the ‘flying geese’ model of Japanese investment,” he told China Daily Asia Weekly.
“That is when multinationals relocate much of their manufacturing overseas where costs are cheaper.
“Companies like Nissan, Toyota and Honda invested heavily in Thailand, developing the infrastructure and training the local workforce. Over the years technology diffusion helped small- to medium-size Thai enterprises become competitive.
“What you have is technical interdependence and Japanese management style, which has enabled Thailand to cement its position in Southeast Asia.”
According to Tony Pugliese, analyst and director with automotive industry research and consulting company Asia Motor Business, over the last 10 years vehicle manufacturers have consolidated most of the global pickup truck production in Thailand, which accounts for a significant part of the industry’s growth.
“Thailand is also the main source for private cars within ASEAN, with the exception of Malaysia,” he says. “And the Thai government is hoping that the development of its eco-car policy will spur a further phase of industry growth.”
Today the automotive industry is the third-largest industry in Thailand generating over $28 billion and contributing 12 percent to the country’s GDP.
Despite the heavy damage caused by last year’s flooding, Japanese manufacturers have no intention of pulling out of Thailand and are in fact spending more on expanding their operations.
Mitsubishi Motors has begun the mass production of its global compact car Mirage at the newly constructed Laem Chabang plant in southeastern Thailand.
The cars will not only be sold in Thailand but will also be exported to Southeast Asia, Europe, Australia and the United States. Plans call for manufacturing about 100,000 vehicles at the plant this year, with about 70,000 for export.
The start of its third plant in Thailand means Mitsubishi will expand its annual production capacity there by 150,000 to a total of 460,000. That will make Thailand an even more important production base for Mitsubishi, which in fiscal 2010 had total worldwide production of about 1.18 million vehicles.
Honda, which was heavily affected by the flooding last year, has spent $314 million to restore its plant in Ayutthaya province and return to full production, hoping to produce 240,000 vehicles this year.
Suzuki began production of its Swift compact car at a new plant in Rayong province in March. Toyota, which has three plants on the outskirts of Bangkok, as well as Mazda plan to increase production capacity in Thailand.