AUTOMOBILE production in Thailand is expected to reach its precrisis level in 2004 and grow to at least 1.5 million units per year within a decade, said speakers at a meeting of the Thailand Automotive Industry Association.

Automobile production would grow from 327,233 units last year to 427,000 units this year, said David L Snyder, president of Ford Operations (Thailand). “We see a moderate but sustainable growth in the Thai automobile sector for the next decade,’’ he said.

“We still see underutilisation of manufacturing capacity [of about 50 per cent] and many companies are pursuing export opportunities,’’ he said.

Toyota Motor Thailand (TMT) Co Ltd president Yoshiaki Muramatsu said that auto production in Thailand would reach 690,000 units in 2005.

Vithit Leenutaphong, executive director of the Yontrakit Group Co Ltd projected production of 1.56 million vehicles by 2010.

Snyder the economic crisis in 1996 had a major impact on the automobile industry, which contracted by more than 40 per cent.

“The floating of the baht in July 1997 saw the currency’s value falling from Bt25 per dollar to Bt58 while the property and finance sectors were experienced a crash. From an eight per cent annual growth, Thailand’s economy felt a 10 per cent decline and significant reductions in industry volumes,’’ he said. Snyder also mentioned the overcapacity problem as well as layoffs in the industry and weakened suppliers. Although the finance and real estate sectors have yet to recover, with restructuring still going on, Snyder said that a positive recovery factor for the automobile industry was the fact that a high inflation rate didn’t materialise, so the Thai government was able to lower interest rates to stimulate the economy.

“American players like Ford and GM will play a bigger role in the Thai automobile industry, which is currently dominated by Japanese players,’’ he said.

The current 92 per cent share belonging to Japanese manufacturers would drop to 75 per cent, he said. “This doesn’t mean that Japanese companies will sell fewer cars, only that the American companies will sell more cars while the market expands. Market growth in this decade is expected to be about 15 to 20 per cent per year.’’

Pickup trucks will dominate the industry due to favourable duty rates, while multipurpose and sportutility vehicles will experience higher growth, he said.

Whether Thailand becomes the “Detroit of Asia’’ will depend on the policies of the manufacturers, Vithit said. Currently only Ford, General Motors and Mitsubishi have concrete export plans while others are still reluctant to use Thailand as a manufacturing base. Companies like Toyota and Honda only started exporting during the crisis to keep their factories running, he said.

It is difficult for Toyota to make Thailand its export base because the carmaker has five other plants around the world that also produce pickup trucks, Muramatsu said.

“Currently exports amount to less than 10 per cent of production. but we hope to achieve a 20 per cent figure in the future,’’ Muramatsu said.

Meanwhile, the motorcycle industry is also on a recovery path and production will likely reach the 1995 peak of 1.465 million units within seven to eight years. By 2010, motorcycle production in Thailand is expected to reach 1.7 million units.

Total motorcycle sales in the Kingdom will be about 750,000 this year, compared to 606,000 last year and 535,000 in 1998, said Michiro Kitamura chairman of Asian Honda Motor Co Ltd. By 2010, motorcycle production would reach 1.7 million units, he said.

The strongest trend in the motorcycle industry will be the shift from twostroke to fourstroke models. “In 1994 fourstroke motorcycles accounted for only 14 per cent of the total production but in 1999 the figure rose to 50 per cent,’’ he said.

The speakers agreed that the Association of Southeast Asian Nations’ (Asean) Free Trade Area (Afta) and other cooperation plans like the Asean Industrial Cooperation (Aico) will be vital to the development of exports from Thailand.

“CBU (completely built up) production will be mainly for the local market and exports will consist mainly of CKD (completely knocked down) components – intraregional complementation will be important for largescale production,’’ Kitamura said. Snyder added that Thailand can become a CKD production centre for Asean.

Localisation is important in reducing the production cost of automobiles assembled here, Muramatsu said. In order to survive the competition, local parts suppliers must strive further to improve their standards in terms of quality, price and delivery.

According to the TMT president, the automobile market will welcome new emerging global auto makers and suppliers and there will be higher market competition among current players.

“There will also be higher customer expectations of products and services, and in order to survive the competition, auto makers must be able to respond to changing needs quickly and flexibly, develop new products and technologies as well as have innovative cost reduction.

“Auto makers cannot do this by themselves and we will see more new alliances between auto makers and suppliers in the future,’’ he said.

Local suppliers should have joint ventures or technical collaboration with foreign suppliers in order to obtain technology transfers and know how, Vithit said.

BY Kingsley Wijayasinha