A good reputation is not enough

Thomas Hundt

German machine tools are highly regarded in Thailand. However, Japanese models are the market leaders while new competitors are emerging.

Thailand is an ideal sales market for German machine tools as it is the second largest economy in Southeast Asia and its 25% share of manufacturing in terms of economic output is the highest share among the ten ASEAN states.

Japanese models are ahead in all market segments, followed by machine tools from China. Germany supplied under 4 per cent of the machines sold in 2022. “Thailand is Japan’s extended workbench” - Oliver Prpic Managing Director HERMLE (South East Asia).

Japanese companies have invested heavily in Thailand in recent decades and dominate most industrial sectors. For example, the automotive industry, which is particularly important for mechanical engineering, is predominantly in Japanese hands.

THAILAND, THE LARGEST CAR MANUFACTURER IN SOUTHEAST ASIA

Industry associations expect around 1.9 million cars and 2.1 million motorbikes to roll off the production line in 2023. The domestic automotive industry is led by groups such as Toyota in the passenger car sector and Honda in the motorbike sector.

Japanese original equipment manufacturers are also the main suppliers. However, the entire industrial sector has grown so strongly that European and US automotive suppliers have now also established a broad base.

NEW CUSTOMER INDUSTRIES

Electromobility will also influence the future demand for machine tools in Thailand.

However, changes are occurring here more slowly than in Europe. Chinese investors are rolling out the Thai market for electric vehicles and setting up assembly plants. This is because the Thai government is generously subsidizing investments in electric cars, batteries, power electronics, cooling and charging systems. The first projects in these sectors have already been approved.

Other important customers for machine tools include the huge electrical industry, together with manufacturers of air-conditioning equipment, the plastics industry with downstream mould construction, and other sectors of the metal industry.

Several mechanical engineering companies based in Thailand manufacture machine tools and CNC machines tools for export. They include CITIZEN MACHINERY and Star Micronics from Japan, as well as ANCA Manufacturing from Australia. The Thai

company Holcyon is reckoned to be the largest manufacturer of polycrystalline diamond cutting tools in Southeast Asia, with revenues of US$34 million in 2022.

DESPITE A GOOD REPUTATION, IT IS NOT AN EASY MARKET FOR GERMAN COMPANIES

Many industrial customers operate in the medium and lower quality market segment. As such, they tend to focus on price rather than the quality and durability of their machines. Suppliers of machines from China and Taiwan, for example, are stepping up their sales activities.

German deliveries of machine tools are dependent on larger projects, so their order volumes fluctuate considerably. In 2022, German exports totalled 34 million Euros and only 16 million Euros in 2021.

The market for German parts and accessories, on the other hand, is stable because many German machines are already in use. Deliveries of parts and accessories have totalled around 4 million Euros per year since 2018.

CONSIDER LOCAL SALES CULTURE

Market observers report that German machine tool technology enjoys a good reputation in Thailand, although customer friendliness in the ‘Land of Smiles’ could be improved. A more modest manner is better received.

Foreign suppliers initially use local expertise and enter the market via a national sales partner. The choice of partners is broad and the German-Thai Chamber of Commerce can help search for suitable sales candidates.

Yamazen, a Japanese trading company, is the largest dealer of foreign machine tools, most of which come from Japan.

Sahamit Machinery is a large publiclylisted Thai machine importer and dealer representing 14 suppliers of machine tools from all over the world, including Schwäbische Werkzeugmaschinen GmbH.

Sahamit generated some US$ 14 million in sales of machine tools and tools in 2022.

GERMAN PROVIDERS STRENGTHEN THEIR DISTRIBUTION

German suppliers are now setting up their own subsidiaries in Thailand. For example, GROB, a German manufacturer of machining centres, converted its representative office into a full subsidiary at the beginning of 2022, allowing it to legally take care of service and sales.

HERMLE AG from Gosheim, a specialist in 5-axis machining centers, also founded a subsidiary in the heavily industrialized Thai province of Chonburi to serve the Southeast Asian markets.

The subsidiary of Gühring, a German manufacturer of precision tools, has been serving the Thai market since 2006 and also manufactures special tools on customer request.

Other market entrants can gain a good insight into the Thai market at the annual METALEX trade fair in Bangkok. The next edition will take place from 20 to 23 November 2024.

At METALEX in November 2023, 71 companies from Germany presented their products, 26 of which exhibited at a joint German stand. However, most exhibitors came from China (214), followed by Japan (174), Thailand (104) and Taiwan.

Contact details:

Thomas Hundt

Director Thailand, Cambodia, Myanmar, Laos

GERMANY TRADE & INVEST

www.gtai.com