August 2012
Vibrant Thai Automotive Industry Shattering Performance Records Thailand’s automotive industry is growing like gangbusters in 2012, with makers left and right shattering performance records. The country’s automobile production for January to June reached 1.06 million units, marking robust growth of 30.5% compared with the corresponding period of last year. Auto sales in the domestic market zoomed to a total of 606,523 vehicles in the first half, up a whopping 40.4 % y-o-y, with many car brands seeing 1H growth nearly double. Exports shot up by 14% to 456,869 units. Performance in June alone showed an especially blistering pace. With all carmakers recovered from last year’s massive flooding, Thailand’s automobile output for June reached 205,600 units. This represented an all-time high for any single month and a hefty 33.8% y-o-y increase. Domestic sales during June soared by 75.7% y-o-y to set yet another record at 123,471 units. Exports of Thai-built vehicles in the month hit 94,722 units, the most since the country began auto exports in 1988, the Federation of Thai Industries reported. June activity in the pickup truck sector was also brisk, with production of 1-ton models rising to 119,568 units, up 20.3% from a year earlier. For the entire JanuaryJune period, 1-ton pickups output skyrocketed by 36.1% y-o-y to 679,915 units. Thailand remains the world’s second-largest producer and exporter of 1-ton pickup trucks. The spectacular first-half success of the Thai automotive industry can be attributed to several factors. These include production capacity’s rapid recovery from the end-2011 flood, the strong condition of the domestic economy, consumers’ warm response to launches of new models, and the government’s first-car-buyer stimulus program. Toyota, the top-selling brand in Thailand, acknowledged that the stimulus program accounted for 50% of the company’s subcompact sales during January-June. Eco-Car and a Third Champion The ongoing success of the government’s eco-car project is adding vigor to the industry as well, spurring output and sales. The Board of Investment (BOI) launched incentives to promote the manufacture of fuel-efficient and environmentally safe ecocars in Thailand back in 2009. So far, there are five BOI-promoted companies of eco-
car manufacturing. Nissan was the first, introducing its March model and later offering the Almera. Today those compete for Thai market share with the Honda Brio, Suzuki Swift and Mitsubishi Mirage. Toyota is to launch eco-cars in 2013. Among the BOI’s requirements on eco-cars, such vehicles need fuel economy of at least 20 kilometers per liter, must meet the Euro 4 emission standard, and should have UNECE 94 and 95 safety levels. In addition, four of five main components (cylinder head, cylinder block, crankshaft, camshaft and connecting rod) must be produced in Thailand. More than 200,000 eco-cars have been sold locally so far, and the current waiting list exceeds 20,000 units for each model. According to BOI Secretary General Atchaka Sibunruang, once all five manufacturers (including Toyota) reach production of 100,000 units per year, investment in the ecocar project would have exceeded 200 billion baht. Even better days are ahead for the industry, which begins to explore such avenues as electric car production. The birth of an EV sector locally would represent a potentially lucrative opportunity for investors. To help spur sector development, the BOI is offering tax incentives for investment in the manufacture of the high-tech batteries that are the heart of the EV. Industry experts believe that once mass production commences, local demand for electric cars will increase as economies of scale push down sticker prices. Mitsubishi Motors Thailand is among the enterprises to have already expressed great interest in the EV project. The company said it could launch production of an electric version for its Mirage eco-car in two years as long as the batteries are available. With lower energy consumption than gasoline or hybrid-powered vehicles and a high level of material recycling, EVs could make up 10% of global automobile output by 2020, according to the Thai Automotive Industry Association.
World Class and Still Growing With its good fundamentals, the Thai automotive industry has matured into a worldclass production base. The record-breaking first half shows that international carmakers continue to regard Thailand, dubbed the “Detroit of the East,� as an excellent investment site for its highly skilled but affordable workforce, state-of-theart industrial estates that focus on the automotive industry, strong network of parts suppliers, and strategic business location at the heart of Asia. Thailand will become even more attractive as an investment location when nations of the surrounding region launch the ASEAN Economic Community (AEC). The 10 member countries of ASEAN, or the Association of Southeast Asian Nations, are scheduled to form the AEC in 2015 as a massive single market and production base. Thailand, Singapore, Malaysia, Indonesia, Vietnam, Cambodia, Laos, Myanmar, Brunei and the Philippines will drop trade tariffs among them to zero and liberalize investment sectors, enabling the free flow of goods, services, capital and people across the regional bloc. This will open all doors for businesses operating in Thailand to enjoy easy access to a huge market of 600 million consumers.
While the entire Thai automotive industry is surging, performance by some companies has been utterly phenomenal. Chevrolet Thailand sold 112% more vehicles in the first six months of 2012 compared with the year-earlier period. Ford Thailand announced its all-time best monthly sales performance for June at 71% y-o-y growth.
Ford this year is also celebrating the opening of its US$450 million plant in Rayong Province. The plant has an initial production capacity of 150,000 vehicles, which increases the American automaker’s capacity in Thailand to 445,000 units annually. That makes Ford, which has invested more than $1.5 billion in expanding its local operations since 2007, one of the largest producers and exporters of vehicles in the country.
Encouraged by the prosperous nature of the Thai automotive industry, many other enterprises have stepped up their investments in 2012. U.S.-based Dana, a producer of auto axles and driveshafts with 19 manufacturing facilities in the Asia-Pacific region, said it will make Thailand its ASEAN hub. Swedish auto giant Volvo also announced plans to soon move its production base from China to Thailand to serve as its hub, with an eye on the AEC. China’s biggest carmaker, Shanghai Automotive Industry Corporation, reportedly intends to set up a manufacturing base for right-hand-drive vehicles in Thailand, also with the AEC in mind. In other investments announced during 2012, Bridgestone is building a 20 billion baht factory for construction-vehicle tires, Siam Toyota Diesel is pouring 6 billion baht more into engine production and Thai Summit Group, one of Thailand’s largest auto parts makers, will spend 5 billion to bolster its existing factories. As industry activity races ahead, forecasts are for Thailand’s total automobile output in 2012 to hit or exceed 2.1 million units, up dramatically from 1.46 million units last year. Domestic sales projections for 2012 have been revised to a record 1.2 million units, or 553,900 passenger cars and 646,100 commercial vehicles. Whole-year exports are estimated at 1 million units. The impressive momentum established in 2012 will likely carry the vibrant Thai automotive industry to further historic levels in 2013 and beyond. Boosting confidence in the upswing is the Ministry of Finance’s recent announcement that the first-car- buyer scheme, which offers a 100,000 baht excise tax rebate for customers, is to be extended to mid-March 2013. Thailand is on track to break into the top 10 of the world’s biggest auto producing countries when output climbs to 3 million units in 2015 as opportunities increase with the advent of the AEC. Steady growth will be fueled by continued government support of this core industry that employs 350,000 workers and anticipated further investment from makers.