THAILAND CONTINUES TO GROW AS THE DETROIT OF ASIA
Thailand is often referred to in recent years as the “Detroit of Asia”. Automobile, motorbike, auto and motorcycle spare parts and items for the after sale auto market are made by numerous factories throughout Thailand. In fact, the Auto Industry is the number one manufacturing industry in Thailand in terms of value, followed by Hard Disk Drive manufacture. Increasingly the Thai government’s policy of early promotion of the Auto Industry and then recent acceleration of trade preferences under the Asia Free Trade Area (AFTA), FTAs with Australia, India and pending FTA’s with China and the U.S. are creating even more favorable conditions in which the economies of scale and efficiencies of the Thai Auto and parts industry are magnifying Thailand’s advantages in this area. April was an active month in Thailand for the Auto market. Here are some of the developments as reported by the Thailand Board of Investment (BOI) and other newspaper sources from throughout the region:
Statistics: Jan-Feb 2004
(Source: Thailand Automotive Institute)
Vehicle Production
138,563 Units
Vehicle Domestic Sales
93,167 Units
Vehicle and Parts Export
20,942 Million Baht
India Sees the Downside of Free Trade
"The FTA with Thailand is definitely going to have an adverse impact on car makers in India," said K V Shetty, president of the Automobile Manufacturers Association of India. And according to S M Khurana, an auto-industry honcho, "perhaps even without intending to, the Thai FTA could end up hurting India's manufacturing industry".
Admittedly, for the country's auto-component industry in particular, which is still emerging from its chrysalis, the Thai FTA is a serious threat. Thailand after all boasts the biggest auto-component manufacturing base in all Asia (with the exception of Japan) and it is a mere three days by sea from the southern Indian city of Chennai, one of the country's auto hubs. With duties gone, car makers would most probably find Thailand less expensive to source components compared with India's manufacturers. Thailand, which dubs itself the "Detroit of Asia", has a highly sophisticated car industry with very high economies of scale, which makes it competitive on the world stage. Thus Indian component manufacturers could find themselves out on a limb: "The sudden loss of market share in the domestic market could well put the country's now-nascent auto-component industry's global aspirations in jeopardy," said Kamal Sharma, the owner Horizons International, a small-scale auto-component unit.
From the Asia Times, March 2004Mitsubishi to designate Thai plant as their major production base in ASEAN
According to the Japanese newspaper, Nihon Keizai, Mitsubishi Motors Corp will undertake a restructuring process on its entire production systems.
As part of the plan, several consolidations of their production bases will be made. For instance, the Pajero Sport Utilities will be moved to China. Possibilities of divesting in subsidiaries in Malaysia and the Philippines will also be considered while their manufacturing plant in Thailand will become the main production base for SE Asia. At present, the production capacity in Thailand is 126,000 units per annum and is expected to reach 166,00 by year 2005.
(Bangkok Post, March 2004)
Honda to Invest 167 Million in Thailand - Minister
Honda Motor Co plans to add a production line to its Thai operations to build a new compact car due to start rolling out in 2007, a Thai minister said on Friday. The production line would have a capacity of 100,000 cars a year, Vice Industry Minister Vatchara Panchet told reporters after a meeting between Thai Prime Minister Thaksin Shinawatra and Honda president Takeo Fukui. "Their production target is to produce 100,000 cars a year with an initial investment of 6.6 billion baht in the first year," Vatchara said. The government aimed to expand Thailand's export production base from light trucks to compact cars by introducing a new scheme to lure foreign car makers to use the country as an export base, Vatchara said. "This project will help push our objective to be the Detroit of Asia. We need to compete with China, which is rushing to attract investments from major global brands," he said without giving details. Vatchara did not say what the new Honda model would be, but said the car would be fuel-efficient and conform to European Union emission standards. He said it would sell for 350,000 baht, about half the price of 1.5 litre Japanese brand car. Honda would apply for investment promotion privileges -- including tax holidays -- which could be approved by the end of this year, Vatchara said. Honda executives could not be reached for immediate comment.
Reuters – March 2004
Thailand targets to produce 1 million automobiles in 2004
BANGKOK, March 26 (Xinhua) -- As a part of Thailand's pilot project to become the automobile hub of Asia or the "Detroit of Asia", the country's production of automobiles could reach 1 million this year, 400,000 of which will be exported, the Businessday newspaper reported Friday. Wanlop Tiersiri, director of the Thailand Automotive Institute unveiled the plan at the 25th Bangkok Motor show which opened to public Friday. He also revealed that this year export of auto parts is likely to be about 200 billion baht (5 billion US dollars) while production of motorcycles is earmarked at about 2.7 million units. According to the ambitious project, the country estimates production to nearly double in 2011 at about 1.8 million, with export the figure reaching 800,000; export of autoparts at 400 billion baht (10 billion dollars) and motorcycle production at 3 million. He also revealed that this year export of auto parts is likely to be about 200 billion baht (5 billion US dollars) while production of motorcycles is earmarked at about 2.7 million units. Wanlop was quoted as saying that Thailand wanted to be the world's ninth-largest car manufacturer by 2011, up from its current position at 15. He said that Thailand produced 750,512 cars last year, of which 533,176 were sold domestically and the remaining exported. Mitsubishi is the leader in the car export segment, followed by Ford, Mazda, Honda, Toyota, Isuzu and GM respectively. The total volume of exports was 237 billion baht (5.9 billion dollars), while import was at 178 billion baht (4.5 billion dollars). The government had adopted a dual strategy to promote Thailand as the automobile hub of Asia including to create satisfactory circumstances for business operations and to increase competitiveness among car makers here, Wanlop said, adding that the government would also develop information technology, human resources, international free trade area, transparent regulations and infrastructure and facilities towards this cause. He noted the country would implement effective measures to attract international car manufacturers to remain and further expand their production base in the country. The Federation of Thai Industries (FTI) said Thailand exported a total of 42,228 cars in the first two months this year, worth 18. 8 billion baht (470 million dollars), an increase of 39.62 percent from the same period last year.
(Xinhua - China National News Service, March 2004)
Yontrakit eyes opportunities from free trade areas
Yontrakit Group, the largest Thai-owned car dealer and assembly group, is considering changing its strategy to benefit from free trade areas.
The group currently assembles Kia,Volkswagen, Audi and Peugeot for the domestic market only, but is now planning to shift production towards foreign markets. “(The company) will gain export benefits in accordance with AFTA (the Asean Free Trade Agreement)”, said Mr. Vichien Leenutaphong, Yontrakit Executive Director.
The company is said to receive full support from the French auto maker, Citroen, as the initial plan is for YMC to build and export 5,000 Berlingo line to ASEAN countries. “We will definitely start assembling the Berlingo for export within this year as there is substantial demand for the car in ASEAN”, he added.
AFTA will certainly benefit the local autoparts industry as it will encourage car assemblers to use more local parts to Thailand Board of Investment, Paris Office Issue 2/2004 022004 Page 2/ 3 meet the 40-percent ASEAN content requirement. Yontrakit believes that the strengthening of Euro will result in the rise of imported car prices by 30-45 percent, thus forcing the group to adopt new strategies such cost assistance/reduction and brand switching from Skoda to Kia (whose price is based on the softer dollar).
(The Nation April 2004)
Nissan takes over in Thailand
Japan’s third largest car- maker has recently raised its stakes in Siam Motors and Nissan Co. and Siam Nissan Automobile from 25 to 75 percent. This results in Nissan Japan gaining management control over Siam Motors Group in Thailand.
Siam Motors Group was majority-owned by the Pornprapha Family who has been heading the distributorship and branding Nissan in Thailand over the last fifty years.
The Nissan Group has also plans to increase investment by relocating production of pickup trucks to Thailand and exporting them around the world in order to achieve the global sales target of 3.6 million units by September 2005. Nissan’s Chief Executive Carlos Ghosn is said to believe Thailand as “a potential market for future growth and an excellent base (for Nissan) to expand presence in the (Southeast Asian) region.
(Manager on-line, April 2004)
Q1 sales near 150,000 units
According to figures released by Isuzu and Toyota, auto sales have shown promises to a new benchmark. The first quarter figure shows almost 150,000 units of car sold this year. Should this momentum remains strong, it is then expected that total annual sales this year should reach the 600,000-unit target.
The pickup sector is headed by Isuzu DMax model with an impressive sales volume of 12,495 units last month.
Leading the pack in the passenger car sector are Toyota and Honda, whose performance has remained buoyant with 8,935 units and 7,614 units being sold in March respectively.
(Bangkok Post April 23, 2004)
Local assembly of GT40 mulled
Thai Rung Union Plc (TRU) is in negotiations with Mr Allen Grant, a US Businessman, on the possibility of housing a domestic assembly line of the legendary Ford GT40 supercar.
Mr. Allen Grant, a protégé and assistant to the renowned racer, Carol Shelby, revealed his goal that the placement of engine in the new GT40 will be modified and all the luxury items will be removed. “My goal is simply to come up with an incredibly beautiful supercar that is even faster than the current GT40”, said Mr. Grant. The initial investment is estimated at 80-120 million baht with a capacity of 500- 1,000 units annually.
Mr. Grant’s decision came from several factors, namely the capability of TRU, low labour costs and the readily available automotive resources. He also eyed Carryboy Company as a candidate for the fibreglass body maker. The Carryboy is a Thai-owned company and claimed to be the fourth largest fibreglass body manufacturer in the world.
(Bangkok Post, April 2004)
Thailand promoting itself as the Detroit of Asia
According to Ewan Kennedy in an article in the 16 May 2004 Canberra Times:
- Last year close to 60,000 Thai vehicles were sold in Australia, with even more expected this year.
- Thailand is much more than a vehicle assembler. Many of the vehicle parts are manufactured there, including major body pressings.
- Utes are currently the big thing in Thailand, with most of the major players on the Australian market importing products from there. Toyota, Holden, Ford and Mitsubishi all bring in utes, as does Mazda. Nissan sourced its Navaras from there for a while, though its currently bringing them in from Japan. It's not just utes, though. Holden Zafira is built in Thailand, as are some Honda Accord and Civic models.
- Quality is generally as high as that of vehicles built in other countries, with the Japanese makers keeping a tight reign on quality control. Australian engineering expertise has been used by the Thai vehicle industry in many important areas. This is happening either by an exchange of engineers between auto makers in the two countries, or by enterprising Aussies working on a freelance basis.
- No prestige makes are imported to Australia from Thailand at this stage and that's likely to be the case for some time to come. However, such major players as BMW and Mercedes-Benz do have Thai-built cars.
(Canberra Times, 16 May 2004)
Audi to Establish Production Base in ThailandBANGKOK, May 14 (Xinhuanet) -- Famous German car maker Audi will use Thailand as its production base for export market in the region. Audi AG's managing director for the Asian Pacific region Jorg Hofmann met Industry Minister Pinij Jarusombat here Thursday, stating the company's aim to invest in a Thai plant owned by its local partner, the Yontrakit Group, the Thai News Agency reported Friday. Being a luxury car unit of the Volkswagen Group, the company plans to produce 7,000-8,000 Audi A4 and A6 models per year.
Deputy Industry Ministry Vachara Phanchet was quoted by the agency as saying that Audi chose Thailand to be the second production base in Asia after China due to the Thai government's policy on turning the kingdom into "Detroit of Asia". It hoped to be granted tax privileges by the Board of Investment of Thailand (BOI), and to be benefited from free trade deals signed by Thailand and other countries.
He said the top car maker would be allowed to pay only zero to five import tax under the ASEAN Free Trade Agreement (AFTA) when it uses 40 percent auto parts produced in the 10-nation group. The company, however, said it couldn't use 40 percent of local auto parts in the first two years. Sales of Audi cars produced in Thailand reach 500-700 units monthly. Each car is roughly worth two-three million baht, which is comparable to that of the top-classed Mercedes Benz and BMW, the agency said.
(Xinhua – Chinese National News Service, May 20)
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