New Toyota Plant in Thailand

In the news: Executives at Toyota Motor’s new plant in a Bangkok suburb point out that the factory in Thailand is the first to run on clean natural gas.

The factory is equipped with robots and parts movers moving silently on the assembly floors. Toyota’s $426 million facility shows that despite the political unrest in Thailand it has not affected global carmakers’ positive views of the country.

Thailand is renowned worldwide when it comes to the production of one-ton trucks, with projected outputs of 853,000 units for this year alone. The said figure outpaced United States which according to J.D. Power Automotive Forecasting produces only 588,000 units of trucks.

Thailand is the second biggest market for trucks since it’s a common sight in rural areas where most farm products are produced. The domestic sales for this year are forecast at 510,000 units as compared to the 651,000 units forecast in the United States.

According to Vallop Tiasiri, director of the privately-funded Thailand Automotive Institute, "The strength of our truck industry lies in the size of our domestic market that makes production cost competitive. Our traditional political and labor stability also help."

The Toyota plant has started operation last month and occupies 245 hectares or 605 acres of paddy fields, making Thailand as a major export base for small pickup trucks. Plant Manager Charnchai Suppayakom said, "We ship 4,000 right-hand drive Hilux trucks to Australia a month and another 2,000 of the left-hand version to Saudi Arabia." He also added that the factory’s initial 100,000 annual production capacity can be quadrupled to answer any increase in future export demand.

ToMoCo’s third Thai facility has been able to increase annual vehicle production output to 550,000 of which 40 percent are shipped or exported overseas. The Thai facility will also be used to manufacture Toyota truck parts. The additional 2,000 workers at the Ban Pho plant bring Toyota’s Thai workforce to 13,500 of which 5,000 are permanent staff while the rest are hired on temporary contracts.

Despite the military coup last September in Thailand that has somewhat affected its image as an investment destination for global companies both the Japanese and US carmakers are determined in staying put. Somphob Manarangsan, an economics professor at Bangkok’s Chulalongkorn University said, "Japanese firms are investing more in China, but they don't risk putting all their eggs in one basket. Thai plants are part of their diversification strategy."

Thailand was able to produce 1.2 million vehicles last year and almost half of which were exported. Thailand’s vehicle tax structure that favors pickups over passenger cars makes the one-tonne truck the champion of the Thai auto industry. Inexpensive diesel has also helped to increase sales. Auto columnist Suphat Tisapong said, "Entry prices for pick-ups and passenger sedans are about the same here at around half a million baht ($14,285). But a pick-up comes with a much larger 2.5-litre engine compared with 1.5 litre for sedans.”

Aside from Toyota, Ford Motor Co, General Motors Corp, Nissan Motor Co Ltd, Mitsubishi Motors Corp, Isuzu Motors Ltd, and Mazda Motor Corp. have also opened factories in Thailand for their export vehicles and mostly have started building their plants after Asia’s 1997/98 economic crisis. Each of them has invested 140,000-180,000 trucks a year, exporting them to 100 countries from Australia and the Middle East to Europe and even reaching Latin America.

Automotive Resources Asia analyst May Arthapan said since most producers have already establish their plants in Thailand there would come a time that the export growth will slow down once output meets global demand . She also added, "The big export rise in recent years is a result of the relocation of production base to Thailand. Once this is over, we should return to more normal growth."

J.D. Power has estimated that global demand for the small trucks for this year reaches only 2.1 million units and predicted average annual growth of 7.1 percent for the coming 2008 to 2011. As oppose to J.D. Power the Vallop of Thailand Automotive was not that optimistic saying, "This is quite a small vehicle segment with limited growth potential of perhaps 2 per cent a year." He also added that Thailand would need to shift to other trucks or small sedans once demand for new one-ton trucks ceases.

In recent years the Thai government has offered proposals that include generous incentives for global carmakers just to encourage them to invest in export-oriented facilities for small economy sedans. The Thai government aims to further develop its auto industry which is its second-biggest industry after computers and electronics, employing about 350,000 people and accounting for nearly 15 percent of gross domestic product.