‘Detroit of Asia’ Takes Root in Thailand as Auto Export Hub to 200 Countries

By webadmin on 09:51 pm Feb 28, 2011
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Ploy Ten Kate

Pluak Daeng. Half a world away from the cold streets of Michigan, General Motors is getting ready to roll its first diesel engine out of a recently opened factory in eastern Thailand.

Nearby, Ford Motor is building a manufacturing plant and Suzuki Motor aims to start producing environmentally friendly cars at a new factory in 2012.

Welcome to the “Detroit of Asia,” a vast area 120 kilometers east of Bangkok, where durian orchards have given way to car plants over the past decade, making vehicles for export to more than 200 countries.

While facing increasing competition as an motor-vehicle manufacturing hub from countries including India, China and Indonesia, Thailand looks likely to retain its dominant position and win more investment thanks to its low wage costs and strong infrastructure.

“You have a good supplier network,” said Martin Apfel, GM’s president for Southeast Asian operations. “You really have a lot of experienced suppliers across the board so there’s a potential to really localise a lot.

“The fabric is there. You can’t just drop an assembly plant into nowhere and think that cars would just magically pop up.

There has got to be the right environment that brings high-quality cars,” he said.

The automobile cluster in Rayong is like a small city, spread across 3,450 acres and packed with 25,000 employees toiling in mammoth factories including those belonging to nine of the world’s top 10 automotive suppliers, including struggling Japanese motor-vehicle manufacturers burdened with a strong yen.

Toyota, Honda, Nissan and Mitsubishi all have sprawling operations in Thailand, drawn by its sizeable local market and access to Southeast Asia’s 600 million people.

Global vehicle makers committed about 32.5 billion baht ($1.1 billion) to Thailand in 2010, down 20 percent from 2009, but are holding up well despite political unrest in Bangkok for several months early last year.

Car output was unaffected. Thailand’s Board of Investment is confident the country will remain a magnet for overseas motor-vehicle companies. “The flow of FDI this year is expected to be as high as 400 billion baht [$13 billion], with automotive and parts being a key sector, led by number one investor Japan,” BOI Secretary General Atchaka Sibunruang said.

Last year, motor- vehicle exports contributed about 13 percent to Thailand’s total exports of 6.18 trillion baht, making it the second-biggest sector after electronics and computer parts, according to Commerce Ministry data.

The industry accounts for 12 percent of GDP, the World Bank said in a report in November. Part of the attraction to the country is the low cost of labor.

The average wages for manufacturing workers in China are $412.50 a month, compared with Thailand’s $245.50, Malaysia’s $666 and $129 for Indonesia, according to a 2009 International Labor Organization report.

A large local market, particularly for pick-up trucks, adds to the attraction. “Thailand still has a big market for first-time buyers. The market itself is not as mature as countries like Malaysia, where vehicle ownership is pretty high,” said Hajime Yamamoto, a director in Thailand for IHS Automotive, part of a Colorado-based market research company.

Thailand led Southeast Asia in total vehicle sales in 2010 with 800,357 units, compared with Indonesia’s 764,088 and Malaysia’s 605,156, industry association data show. The region’s strong growth potential means car and motor-vehicle parts producers will further boost investments.

Thailand motor-vehicle parts companies such as Thai Stanley Electric, Somboon Advance Technology and Aapico Hitech are key players in the country’s motor-vehicle chain, with their shares hitting multi-year highs as they benefit from strong order books.