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Toyota to play major role in Thailand
Publication Date : 17-09-2012
Thailand hopes to join the world's top 10 auto producing nations within the next three to four years, and Toyota - the largest auto company in the country - will play a major role in achieving that target.
Kyoichi Tanada, president of Toyota Motor Thailand (TMT), says that auto production of all brands in Thailand is expected to reach a total 2.3 million units in 2012, which would rank it in 12th or 13th place in the world.
"In order to become part of the world's top 10, we need to produce at least 2.5 million vehicles per year and I think that it is possible," he told The Nation's Suthichai Yoon in an exclusive interview.
Tanada said Toyota, as leader of the Thai auto industry, considers the top 10 target as its responsibility, as much as Thailand's. "Thus Toyota's plan is to produce at least 1 million vehicles, or even 1.2 million vehicles, by that time," he added.
However, in order to achieve the goal, the government sector needed to step in and support the industry, either in terms of market or product development, he said.
This year the Thai domestic market could reach a record 1.3 million units, while exports are forecast at 1 million units.
"At the start of the year domestic sales forecast was 1 million units, but it has been raised several times due to dramatic market growth," Tanada said.
Exports have also expanded dramatically, up from 750,000 units last year to a forecast 1 million units for 2012. During the next three to four years the national export target is 1.5 million units per year, but this would require government support, especially in terms of foreign exchange.
"The exchange rate of 31 baht per US dollar is favourable, and 30 baht is acceptable, but 29 baht would cause trouble since there would be no benefits or profits," Tanada said.
Another concern for the Thai auto industry is the lack of skilled personnel, particularly engineers and technicians. "The government should step in and solve this problem in order to raise the production and export capability," he said.
Thailand is considered a major auto production centre, but the role of Thais involved in the vehicle development stage such as design, is minute. "Toyota wants more Thai people to participate in this stage, but the problem is a lack of engineers," Tanada said.
And as the domestic market expands, another problem pending is the lack of technicians for after-sales servicing as well as logistics.
"Logistics is another important issue since it significantly affects the cost of the product. In addition, a good logistics system would also play an important role in market expansion, especially when the Asean Economic Community (AEC) kicks off in 2015," he said.
However, advent of the AEC will also cause difficulties among Thai parts manufacturers, mainly SMEs, due to production costs higher than in other AEC member countries. Auto manufacturers have a policy of obtaining parts from the cheapest source, and if Thai firms are unable to maintain their advantage, the market could be lost.
"The higher expense partly comes from labour costs, and the present 300 baht minimum wage is higher than in Laos, Myanmar, Cambodia or Vietnam," Tanada said. "This is why Thai SMEs need to quickly develop themselves in terms of personnel. This would help them produce higher quality products as well as raise production efficiency, so they could lower production costs," he explained.
"At present, vehicles produced in Thailand depend mainly on locally-produced parts, but after AEC begins, Thailand's neighbours will develop themselves in order to expand their market. So Thailand, as leader of the automobile and auto parts industry in the region, needs to maintain its strengths," he said.
The Asean economic community, meanwhile, would benefit large companies. "The market will be much larger for us. Instead of 60 million people, we will have more than 600 million people due to the lifting of the import tax barrier," he said.
This is approximately half of the Indian market and 40 per cent of the Chinese market where 10 million vehicles are sold per year.
Presently, Asean auto sales reach 3.3 million units a year, but Tanada said there was much potential for growth. "During the next 3-4 years Asean auto production could grow to 5 million units per year," he said.
Apart from the AEC, market saturation in Europe (as well as the financial crisis) and other major markets, has caused auto-makers to turn towards the Asia-Pacific region, he said.
This year Toyota plans to sell 500,000 vehicles in Thailand and 400,000 vehicles in Indonesia.
"For just two Asean countries we have combined sales of 900,000 units. But in [all of] Europe, we plan to sell just 800,000 vehicles this year," Tanada said.
The AEC would enable Thailand to export more vehicles to neighbouring countries, since Thailand is the strongest player in the region.
"This has raised concerns for other countries. For example, the Vietnamese government has asked Toyota to maintain its production line in Vietnam, but from Toyota's point of view, we would like to export cars from Thailand to Vietnam," he admitted.
Toyota has three assembly plants in Thailand with a combined production capacity of 800,000 units. It also has plants in Indonesia (150,000 units/year), Malaysia (70,000 units/year), the Philippines (30,000 units/year) and Vietnam (30,000 units/year).
The company will also raise production capability in Thailand to 880,000 units per year - by restoring production at the Thai Auto Works plant at the end of this year and building a second plant at the Gateway Industrial Park in the middle of next year.