Thailand Thriving as Global Auto Export Hub

Thailand's claim as the “Detroit of the East� is an interesting juxtaposition to the genuine Motor City, where the Big Three are in a desperate price war to hold onto shrinking market share and Tier 1 suppliers struggle to stave off bankruptcy. The contrast couldn't be more marked. Most global auto makers are firmly entrenched in Thailand, which has benefited greatly from the 10-member Southeast Asian

Commentary Thailand's claim as the “Detroit of the East” is an interesting juxtaposition to the genuine Motor City, where the Big Three are in a desperate price war to hold onto shrinking market share and Tier 1 suppliers struggle to stave off bankruptcy.

The contrast couldn't be more marked.

Most global auto makers are firmly entrenched in Thailand, which has benefited greatly from the 10-member Southeast Asian Nations Trade Assn. – the region's first free-trade pact. The Asia/Pacific region has made a full recovery from the economic meltdown of 1997-1998, as sales and production boom.

Thailand's thriving automotive export trade is both a blessing and a curse, sustaining global auto makers that are troubled in their own domestic markets while also posing a threat to some.

German and French ambassadors in Thailand already are voicing alarm about the impact of a proposed Thai-Japan free trade agreement, warning European luxury brands could not compete against the duty-free import of Japanese luxury cars. And there are other trade pacts in the offing.

Could it only be a matter of time before Thai vehicles find their way to

U.S. shores? Japan and South Korea export to North America and Chinese auto makers have made known ambitions to do the same. So, it's not that far-fetched.

By 2010, the Thailand Automotive Institute foresees the country as the third-largest automotive producing nation in Asia, after Japan and China, and the 10th largest in the world, with output of 1.8 million vehicles – 1 million units dedicated for export.

Perhaps more worrisome for the U.S. are the resources Thailand's auto industry is drawing. Global auto makers are pouring money into production facilities. Toyota this spring announced plans to turn the country into its largest production base outside Japan and the U.S., spending $920 million on a second pickup truck plant.

Nissan plans to spend $743 million on new dies and increased tooling capacity to boost output to 200,000 vehicles.

By 2008, Ford will have a total investment of $1 billion in Thailand, and by 2006, General Motors will have invested close to the same, exporting to 80-90 countries in the region. Other auto makers also are planning expansions, and global Tier 1 suppliers have grown to 354 companies – none of them Chinese, by the way.

Total production is expected to increase 20% this year to 1.1 million units, making vehicles and components responsible for 12% of Thailand's gross domestic product. This, of course, is small potatoes compared with last year's total U.S. vehicle sales of 17.3 million, according to Ward's data.

Still, as a high-quality production and export hub, Thailand is providing GM and Ford, albeit late to the party with only 2.8% and 3.9% market share, respectively, the opportunity to reap the benefits from yet another world region.

But as Thailand builds its production prowess, fueled by strong employment, low inflation, easy financing and car sales that have outpaced economic growth, it is one more shadow eclipsing Detroit of the West's sun.

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