The automotive industry in Thailand has shown robust growth in spite of the political turmoil in the country. It has been successful in retaining its position as the “Detroit of Asia.” Ford Motors insists on opening a plant in Thailand in spite of the unrest, a clear indication of continued support from the auto industry.
Thai car sales increased 53.4 percent from 2009, further proving true that it is indeed Southeast Asia’s biggest car market. The country has a large, skilled automotive workforce besides having associated industries for auto-motive parts and components.
Thai Automotive Industry Association announced a leap in domestic demand. Also the automotive and auto parts industry was responsible for a huge increase in export revenue less than only that of computer and electronic parts. This contributed considerably towards the nation’s GDP.
The remarkable growth in the Thai automotive industry is due in part to the reduction in excise duties for small passenger cars. This reduced the price of cars and the added advantage of credit availability was instrumental in increasing demand. Arise in petroleum prices did little to dampen the automotive market growth in Thailand.
According to the Federation of Thai Industries about 38 percent of vehicles manufactured in Thailand are for export, which is witnessing upward growth. The demand for Thai-made one-ton pickup trucks grew in demand both in the domestic as well as export markets.
The reasons for Thailand’s growth in the automotive industry are many. First and foremost being the benefits it derived from agreements like the free trade agreements signed with Australia, New Zealand, China and India and the market opening opportunities in Southeast Asia created by the Asia Free Trade Agreement. The Thai-Australia Automotive trade resulted in an increase in trade between the two nations. The ASEAN countries are major export market destinations after Europe, Australia and middle-east.
Nissan Motor Co. in a recent announcement reiterated its confidence in the stability of the automotive industry in Thailand. The output from Nissan is set to double to 200,000 units in 2010. Nissan’s Thai plant makes five models of automobiles including cars and pickup trucks.
“Not one project is suspended or delayed. Everything is on track,” said Chief Executive Carlos Ghosn of Nissan. The political unrest had affected tourism and consumption in Thailand, which is Southeast Asia’s second-largest economy. The car exports scenario however remained unaffected.
Nissan sources said that the launch of the new model “March” will help increase car sales and help the company touch the magic figure of 200,000 units. Nissan strives to export vehicles to 100 countries from Thailand. The country being the third strategic export base after Japan and Mexico.
Ford Motor faced problems in Europe and North America few years back driving it to expand its operations in Asia. Finding the market in Thailand lucrative, Ford shifted its pickup truck production to the country and transferred its car production unit to Philippines. Thailand is expected to become Ford’s central base for Asia’s production, making it the second largest pickup market world wide and also ASEAN’s largest automotive market and assembler.
In Thailand, both the passenger car market and pickup truck market are led by Isuzu and Toyota, together holding around 65 percent of the vehicle market. Other contenders in the field are Mitsubishi, Nissan, Chevrolet, Ford and Mazda. Diesel powered passenger cars are also in vogue with Toyota in the leading position followed by Honda for market share. Honda has increased its production capacity in Thailand to cater to the export demands of its international market. Toyota, Honda and Ford have established research and development centers in Thailand.
Not to be left behind in leveraging exploding growth in the Thai automotive industry, General Motors has invested in setting up new ancillary units and augmenting the production capacity of its plant in Rayong. Chevrolet from GM is in great demand in the domestic market and outside.
Thai operations have helped many auto manufacturers to serve both domestic and regional demand. Indian Auto giant Tata Motors has its eyes firmly set on Thailand. Being a regional auto major, Tata Motors unveiled its Tata Xenon 1-ton pickup truck in March 2008 at the Bangkok International Motor Show. The Tata dealer network is also well in place for distributing the vehicles.
Ratan N. Tata, Chairman of Tata Motors, said, “Iam pleased that Tata Motors (Thailand) is launching the Xenon pickup in Thailand. The Xenon pickup has been developed and built in Thailand, specifically keeping the Thai customers in mind. We are hopeful that Thailand and ASEAN region will become key markets for Tata Motors in the near future.”
Tata Motors zeroed in on Thailand after studying the ASEAN region in detail. It invested 1.3 billion baht to produce the Xenon pickup truck. This only proves that Thailand is the preferred destination for pickup truck manufacture as it is home to a strong supplier base and a provider of modern technology for making high-quality products.
The Xenon is assembled at the Thonburi Automotive Assembly Plant as it is a well known destination for expe-rienced labor and craftsmanship and has a reputation for quality products.
Besides the craftsmanship and supplier base, the nation’s supporting network is quite extensive with respect to auto parts. This gives Thailand a competitive advantage as in most other countries there is a deficit of infrastructure, which requires parts to be imported resulting in an increase in vehicle costs. The Thai Automotive Industry Association reveals that the auto parts export of the nation will grow steadily. Thailand exports cars to markets in Belgium, Japan and Australia. Destinations for car parts are Japan, Malaysia and South Africa.
The automotive industry’s success anywhere depends on supporting industries like that of auto parts and component manufacturers. Thailand has an extensive network of auto parts manufacturers, which serves to strengthen the industry.
One such auto business is Summit Industries, which caters to the needs of the auto industry in the country. Summit Industries is a large contributor with over 30 subsidiaries and nearly 13,000 employees with auto-part factories in Malaysia and India. The supply base in Thailand is strengthened by these supporting industries, making the country a major vehicle supplier in Southeast Asia. The country boasts more than 700 OEM auto-parts suppliers and 1,000 suppliers in other support industries.
The automobile parts manufacturing sector in Thailand is considered the best in South East Asia, according to Japan Automobile Manufacturers Association. The local part manufacturers supply approximately 80 percent of all parts used for assembly of pick-up trucks, approximately 55 percent percent for passenger cars and nearly 100 percent for motorcycles. The locally produced assembly parts include engines, suspension control and spring, axles, hubs, propellers shafts, brakes, clutches, steering systems, body parts, electronic parts, air conditioning, tires, wheels, internal and external trim components and glass.
Besides Japanese assemblers, U.S. companies Ford and GM have entered the fray by bringing their own suppliers into the Thai auto industry. European assemblers have fewer local part suppliers because of their limited assembling volume. The automotive industry is going through a continuous process of upgrading with ISO9000 certification, which is the standard among major producers.
The Board of Investment or BOIof Thailand and the Thailand Automotive Institute strive to attract investments to produce even the last key components that are presently not produced in Thailand. Incentives are given to support major target industries. The support activities include R&D, design activities, and human resources development. If all components and parts are available in Thailand itself, then multinational auto assemblers can reduce production and logistics costs to make Thailand a major Asian production hub.
To help Thailand retain the “Detroit of Asia” title, Thailand Automotive Institute or TAIhas come out with five key projects. On complete implementation the automotive and auto parts industry could be worth 1.3 trillion baht ($32.5 billion) by 2010, according to TAIPresident Vallop Tiasiri. The government is looking beyond pick-up truck production to include passenger cars by implementing the “Best Little Car” project.
The Thai government has set up industrial estates which offer tax incentives, lower import duties, one-stop visa and work permit advantages. Also multinational investors are not required to have a local partner which is an advantageous proposition compared to most other Southeast Asian countries. This has enabled BMW to fully-own an assembly and manufacturing plant in Amata City in Rayong.
Thai Industrial estates strive to improve lives of people and also improve the position of the country as an investment destination in the region. Thailand is fast becoming a power to contend with, considering the automotive industry. Almost all major Japanese car producers and other auto majors like BMW, Mercedes Benz, General Motors, Ford, Volvo and Peugeot assemble cars in Thailand. Along with the auto parts industry the country has become a strong production base for automobiles in South East Asia.
The auto industry is a priority sector and is looked upon as a driving force behind the country’s economy.
Before the 1997 economic crisis, the auto industry developed in Thailand for meeting domestic demand for cars. The crisis period saw excess production capacity and to tide over the times, export was considered. Thai auto exports increased significantly. The government tried to leverage the capacity and capability and drew up the Automotive Industry Master Plan to make the nation economically strong as it will augment the supporting auto parts and other industries also.
According to researchers and experts in the field, if the Thai auto industry continues to grow as envisioned in the Master Plan for automobiles - that is reaching a total production of 1.8 million units and export of 800,000 units by end of 2010 - then exports will grow around 13.5 percent steadily thereafter. If the growth continues beyond 2010, then Thailand is poised to become an export-oriented auto producing country with automobile exports far surpassing domestic use.
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