Thomas White Global Investing
Thailand
Thailand Stamp
May 14, 2010
A Postcard from Asia Pacific
Thailand: Automotive Industry Gives Hope

Bangkok’s skyline at night

With government support, Thailand has become one of the automotive export hubs of the region.

Think Thailand and most people these days think protests. The Land of Smiles has had its reputation as a tourist paradise sullied over the past year and a half by frequent clashes between the Red Shirts, (supporters of exiled Prime Minister Thaksin Shinawatra), and the Yellow Shirts (supporters of Prime Minister Abhisit Vejjajiva). Tourism figures are dipping in the wake of these protests, but there is hope still. Thailand is one of the preeminent manufacturing hubs in Southeast Asia, and its automotive industry is giving the beleaguered economy reason to cheer.

The month of March ushered in the 31st Bangkok International Motor Show, an event that has grown from humble beginnings back in the 1970s, to the jam-packed, glittering automotive show that it is today. The Car of the Show this time was the new Nissan Micra, a telling sign. For Nissan has now transferred production of the Micra from its Sunderland facility in the U.K. to Thailand, a testament to the country’s undisputed status as a production automotive base. Honda has also confirmed that its Eco-Car would be manufactured in Ayutthaya in central Thailand for sale in both the Thai as well as Association of South East Asian Markets. As well, Suzuki is set to begin production of its eco-cars at its $225 million new facility in Rayong Province in the southeastern part of the country. This vote of confidence in Thailand, despite the county’s political uncertainty, underscores the Thai automotive industry’s degree of resilience.

And Thailand is trying its best not to live up to this confidence. March saw vehicle production almost doubling to 150,119 units from 65,499 units for the same month last year. For the first three months of the year, vehicle production rose by a staggering 92% to 381,817 units. These are healthy figures, even after taking into account a very low base last year when the global recession was at its peak and a sustainable recovery was yet to be mounted.

So why has Thailand become the darling of the automotive industry? Part of the allure is that Thailand remains a competitive manufacturing destination with low labor and materials costs. Geographically, the country is advantageously situated, within close proximity to key regions such as Malaysia, Singapore and China. Government support too has played its part, wooing global vehicle manufacturers to invest in Thailand. This has included incentives for manufacturers to produce environmentally friendly green or eco cars in the “Land of Smiles.” Importantly, there is no ‘national car’ in Thailand, and that is in sharp contrast to neighbors like Indonesia or Malaysia, who have tried to promote their national brands like Timor and Proton, often to the detriment of the industry.

And the automotive industry has endeared itself to Thailand as well. As the third largest industry in the country, the business of automobiles has helped the country’s GDP stay afloat at times like these when Thailand’s tourism sector is affected. Despite the Red Shirts and Yellow Shirts, it is still a win-win situation for the “Detroit of Asia.”

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