Thailand proud of the title 'Detroit of Asia'

Thousands of miles from frigid Michigan in the United States, General Motors will soon roll the first diesel engine off the line at its recently opened factory in eastern Michigan. Thailand.

Ford Motors is building a new factory not far from there and Suzuki Motors plans to start production of environmentally friendly cars in a new factory in 2012.

Detroit of Asia

Welcome to the "Detroit of Asia" a vast area 120 km (75 miles) east of Bangkok. Where in the last decade, durian plantations have made way for car factories, exporting their production to more than 200 countries.

While Thailand faces increasing competition from neighboring countries such as India, China and Indonesia, it will maintain a leading position and attract more investors thanks to low wages and excellent infrastructure.

“Thailand has a good network of suppliers,” says Martin Apfel, GM's President for South East Asia, “There are many experienced suppliers in the area, which is a very important advantage. You can't just start an assembly plant somewhere and then think that the cars will come out automatically. You have to do it in the right location to produce good quality cars.

Huge car factories

The auto industry area in Rayong appears to be a small town of 3450 acres and 25.000 workers employed in the giant auto factories or with suppliers. Toyota, Honda, Nissan, and Mitsubishi already have successful production facilities in Thailand. Attracted by a large local market and access to the countries in the region with a population of 600 million people. In 2010, these major global brands invested more than 32.5 billion baht ($1.1 billion) in Thailand. Admittedly 20% less than the year before, but still substantial. Despite the political turmoil that disrupted Bangkok for several months. The production of cars has not suffered as a result. Thailand's Board of Investment is confident that Thailand will continue to attract foreign car manufacturers.

“For 2011, foreign investment is expected to reach 400 billion baht ($13 billion). With the automotive industry in a key position, led by the No. 1 investor, Japan,” said BOI Secretary-General Atchaka Sibunruang.

Low labor costs

Last year, car exports contributed about 13% of total exports of 6.18 trillion baht, ranking second after electronics and computer parts, according to data from the Commerce Ministry.

An attractive condition is the low wage costs. The average wage for a factory worker in China is $412.50 per month, in Malaysia it is $666 and in Thailand $245.50, according to a 2009 report by the International Labor Organization. However, a risk factor for Thailand is the lack of technically trained personnel.

Another point is attractive, namely the local market and more specifically the pick-up trucks. “Thailand is a big market for customers buying a first car. The market is not yet as mature as the one in Malaysia, for example, where the number of car owners is quite high,” said Hajime Yamamoto, Thailand director of IHS Automotive, part of a US market research firm.

Thailand sold the most cars in Southeast Asia in 2010 with 800.357 units, followed by Indonesia with 764.088 and Malaysia in third place with 605.156.

Export

The high growth potential in the region means that car and component manufacturers will increase their investments. Toyota and Daihatsu are considering building a cheap car in Indonesia. Primarily for the local market, but also for export to neighboring countries.

Auto parts firms in Thailand such as Thai Stanley Electric, Somboon Advance Technology and Aapico Hitech occupy a key position in the automotive industry with sales increasing every year. The auto parts index rose more than 63% last year, better than the overall industry increase of 41%.

Mitsubishi Motors is investing 16 billion Baht ($535 million) in the new “Global Small” car, which will start production in 2012. Nissan invested 5 billion baht in the development of its "March" model, which started production last year at a factory near Bangkok. In March, Honda plans to launch the new car “Brio”, an environmentally friendly car.

Markt

Tax incentives for manufacturers of small cars that consume 1 liter of fuel for at least 20 km will give the industry another boost after the success of the pick-up truck. Thailand is the second largest market for these types of cars after the United States.

“Thailand's car production is expected to increase by nearly 2011% to 22 million units in 2 and will rise to 5 million units in the next 2,5 years, said Vallop Tiasiri, president of the Thailand Automotive Institute, a government research institute. ”Of those 2 million cars, 1.15 million will be exported, of which new models of pick-up trucks and small fuel-efficient cars will make up the majority. On the local market, after sales of 850.000 cars in 2010, the aim is to increase to 900.000 in 2011. More than 55% of car production goes to the Middle East, Asia, Australia and New Zealand”.