Picking Up Speed

As Thailand clinches its claim to be the “Detroit of the East,” the pace is picking up. The 1998 economic crisis is a faded memory, and most of the world's major OEMs are even more firmly entrenched here, eager to broaden both their reach and their grasp.

The exuberant growth now under way is unprecedented and should create new economies of scale and hone a new edge on the competitiveness of Thai vehicle makers. Major players have been on the move in the region.

In April, Toyota Motor Corp. announced plans to invest 37 billion baht ($920 million) to fund a second pickup truck plant, almost double capacity in the Gateway passenger car plant and cover development of future models and other costs. Capacity will be increased in Toyota's three plants to 550,000 units by 2007.

Nissan Motor Co. Ltd. has tripled its ownership in Siam Nissan Automobile Co. Ltd. to 75% and assumed management control. In the five years ending 2008, 10 new models will be introduced, and $743 million will be spent on new dies, new tooling and a capacity boost from 130,000 to 200,000 vehicles.

By 2008, Ford Motor Co.'s current 5-year, $500 million plan will have funded new vehicle programs and expansion of the AutoAlliance Thailand Ltd. plant in Rayong by nearly 50% to 200,000 units, doubling total Ford investment here to $1 billion.

When the makeover at its Rayong plant is finished in 2006, General Motors Corp. will have invested close to $1 billion in Thailand and have the ability to make 270,000 vehicles a year.

New and proposed investment by Isuzu Motors Ltd., Mitsubishi Motors Corp. and parts maker Denso Corp. easily could swell the new investment splurge over the next two to three years between $650 million and $3 billion.

Production is expected to increase 20% this year to 1.1 million vehicles, split roughly between exports of 400,000 and domestic sales of 700,000, up from the record 626,000 last year. Vehicles and parts are responsible for 12% of the Thai gross domestic product.

The latest surge in investment underscores Thailand's growing importance as a regional hub for most of the major global players including Toyota, Isuzu, Mitsubishi, Ford and GM.

The Association of Southeast Asian Nations (ASEAN) Free Trade Agreement is viewed as another plus for OEMs, with the other three major ASEAN auto-producing countries, Thailand, Indonesia and the Philippines, lowering tariffs to 5% or less for ASEAN members.

Malaysian tariffs remain 20%, and substantial protection is given to the two national car companies.