Growth prompted by support measures from government and FTAs
Auto parts suppliers and car makers are increasingly looking at the possibility of expanding their operations in Thailand. Thailand’s market is expanding at a rapid pace; Vehicle sales 2010 totaled around 800,000, a 45% increase on 2009. But it is the country’s production figures that are the most impressive, with annual vehicle production of 1.65 million vehicles last year, up 64.6% on 2009, making the country the 13th largest automotive producer in the world. Of this, 54.4% of total output is destined for export.
Thailand’s attraction as a low-cost production hub comes from its well-established supplier and auto manufacturing base. The country offers numerous advantages such as free-trade agreements (FTAs) with many countries, including membership of the ASEAN trade bloc, and its geographical location offers access to markets across Asia. These benefits coupled with dedicated support measures from the Thai government are encouraging an increasing number of overseas automakers to invest in the country.
Recently, suppliers including Koito have announced plans to construct a plant to manufacture headlights. Aichi Steel intends set up a facility to manufacture crankshafts, gears and other forged products. Chinese company, Hangzhou Zhongce Rubber has signed a joint-venture (JV) agreement with Thai Hua Rubber to setup a THB5bn (US$163.8m, 20 January 2011) tire plant in Rayong Province. The Thai vehicle market has been witnessing strong growth for several months now, largely thanks to government support measures and the stabilising global economic situation.
Thailand is considered as an attractive region for rubber producers and produces around three million metric tonnes of rubber annually. Further, Thailand in addition to Indonesia, Malaysia, Vietnam, China and Sri Lanka is member of the Association of natural rubber producing countries. This is another reason why the country is attracting suppliers, including Bridgestone, which announced in December last year to invest almost ¥16.6bn (US$199m, 16 December 2010) in its truck and bus radial tire manufacturing plant in Chonburi.
To invite more suppliers and OEMs, the Thailand Board of Investment (BOI) added upcoming technologies such as hybrid drive, brake regeneration and electronic stability control under its incentive scheme. Thailand’s Ministry of Energy is promoting fuel-efficient transportation reducing excise duty on E85-compliant models at the end of 2010. The tax cut is aimed at promoting E85 gasoline, a blend of 85% ethanol and 15% gasoline, as part of the government's plan to raise the share of renewable energy consumption to 20% by 2022 from the current 7%. The reduction in the excise duty is expected to prompt automakers to introduce E85-compliant models in the country.
Production looks set to expand in 2011. Honda Automobile (Thailand) Ltd is to add an extra shift at its Ayutthaya facility in the first six months of 2011, with the intention of increasing annual production an extra 10,000 units 130,000 units.
Backed by the strong growth, the Thailand Automotive Institute predicts that the country will overtake Spain, Canada and Mexico and move into the top ten vehicle producing nations, achieving its capacity target of 2.3 million units by 2014.
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