Thailand Auto Industry

Thursday, December 01, 2005 Print this Comment on this E-mail this Michael J. Dunne Thailand: Japan’s Backyard Michael J. Dunne / Autos Insider While China and India steal the headlines, Thailand's automotive industry makes quiet, remarkable progress. Vehicle production will top 1 million units this week. The industry expects total output to reach 1.15 million cars and trucks for the year. Exports will surpass 450,000 units, making Thailand the seventh largest vehicle exporter in the world. Mazda, Ford, GM, Mitsubishi, Toyota and Isuzu ship cars and trucks to 106 countries from factories here. Thailand is already the second largest pickup truck market on the planet, after the United States. Domestic pickup truck sales will reach 400,000 units this year, up 23 percent compared to 2004. Head-turning growth and a passion for pickup trucks in this nation of 63 million would seem a natural draw for American industry. In fact, the Thai Board of Investment championed the country"s auto industry as the "Detroit of Asia” during the 1990s. The aim of the campaign was to lure back the Big Three, who had closed up their Thai operations in the late 1970s. Detroit did return, built world-class plants and developed nation-wide retail networks. But in the ten years since their re-entry, GM, Ford and Chrysler have encountered Iwo-Jima like resistance in the market. Among people who live and work here, Thailand is known as Japan's backyard. Japanese brands account for nine of ten new cars sales. Toyota alone has 40 percent market share. Isuzu dominates the truck segment with 37 percent of sales. GM, Ford and Chrysler as a group have battled to 8 percent market share since re-entry 10 years ago. Even that modest success would not have been possible without heavy reliance on their Asia affiliates, Mazda, Isuzu and Daewoo. Ford and Mazda produce half-ton pickups from the same assembly line at their jointly owned facility in Rayong, 90 minutes southeast of Bangkok. Chevrolet"s popular Colorado pickup was co-developed with Isuzu. GM also sources knocked-down kits from its Korean subsidiary, GMDAT. Under the skin of the popular Chevrolet Optra sedan marketed in Thailand is a Daewoo Lacetti. The Chrysler brand - which is without an Asian manufacturing partner - has been forced to beat an ignominious retreat from the market. (Mercedes-Benz has 0.8% market share). If you set brands aside and look exclusively at the origin of the vehicle platforms, Japan and Korea take 97 percent of the market. American companies may have arrived ten years ago with the desire to transform Thailand into the "Detroit of Asia.” But today, Ford, Daimler Chrysler and GM implicitly acknowledge that Asian manufacturing capabilities are pre-requisite to holding one's own against rivals from Japan. GM and Ford executives here deserve credit for utilizing Asian affiliates to construct a product strategy good enough to take eight percent of this heavily fortified market. It is one thing to fight for survival in Thailand, a country 12 times zone away from Detroit. But what are the bigger implications for competition back home, where America seems on the path to becoming Japan"s next backyard?