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Thailand close to achieve 3mn auto production milestone
Publication Date : 02-04-2014
Thailand is on the road to hitting the target of 3 million vehicles produced annually by 2017, with automakers showing overwhelming interest in the second phase of the eco-car scheme.
"The response has been better than expected, reflecting their confidence in Thailand's potential as a global automobile manufacturing hub," Udom Wongviwatchai, secretary-general of the Board of Investment, said yesterday.
By Monday's deadline for applications for Phase 2 of the government's eco-car programme, 10 car companies had committed to investing a total of 139 billion baht (US$4.3 billion) for the production of 1.5 million units per year, according to the BoI.
Five are already participants in the first phase - Toyota, Honda, Nissan, Suzuki and Mitsubishi. The newcomers include General Motors, Ford, Mazda and Volkswagen, which will produce its Beetle locally for the first time.
While the existing players plan to invest 86.8 billion baht for the production of 753,000 vehicles per year, the newcomers plan 52 billion baht for 828,000 units.
The qualification report will be completed and ready for approval by the new Board of Investment, which will be appointed as soon as a permanent government takes office.
According to Thai Autobook Research, Volkswagen Group is set to assemble 300,000 Beetles here for delivery next year at a price of 388,888 baht. With a market share of 0.04 per cent last year from selling 600 units, the German firm hopes to boost its domestic share to 15 per cent.
The political turbulence had been feared as a threat to kill the eco-car project. Research firm IHS Automotive forecasts domestic sales to fall 19 per cent to 1.08 million units this year, while production will slip by 8 per cent to 2.2 million units.
However, the outlook for overall investment has been dented by the political stand-off.
According to the BOI, in the first two months of this year, applications for foreign direct investment decreased by 40 per cent in number to 121 projects and 43 per cent in value to 47.3 billion baht from the same period last year.
Thailand is the largest auto manufacturer in Southeast Asia and ninth-largest in the world, with about half of its output sold domestically and the other half shipped overseas. Thailand has been used as a production hub for exports to Asean and beyond.
Colin Kinghorn, the ASEAN Head at Ipsos Business Consulting, points out that the growth engine of the global automotive industry is now the emerging markets.
"After the global financial crisis, they overtook developed markets in overall vehicle sales, and are forecast to account for two-thirds of global production next year," he said.
Consumer demand for eco cars is also growing in emerging markets, and the manufacturing industry is developing new processes to address demand profitably, spurred on by government incentives in China and some Southeast Asian countries, including Thailand.
"Automotive manufacturers are focusing on lower-priced models for emerging markets, entailing more efficient manufacturing processes and standardised parts" said Kinghorn. "Toyota, for example, plans to use just three types of chassis for multiple vehicle models and ultimately standardise some 80 per cent of parts. We can also expect an increase in partnerships and alliances, both among carmakers and across industries."
But Ipsos notes that rapid technological development and new strategic alliances are not enough. The policy and regulatory environment has not kept pace, and the industry must work closely with governments to facilitate the birth of the cars of tomorrow in our region.
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