Honda Puts Thai Plant Plans on Hold

Honda is delaying the startup of its second $350 million car plant in Thailand by six months to a year following this week’s military coup in the country.

The 120,000-unit-a-year plant now under construction in Prachinburi, 90 miles (145 km) northeast of Bangkok, had been due to start production next April.

“We have been worried about the unfavorable conditions since earlier this year, both economic and the political situation,” Honda Thailand Executive Vice President Pitak Pruittisarikorn tells The Nation newspaper.

Honda’s Ayutthaya plant has an annual capacity of 300,000 units.

Pitak tells the Bangkok Post the company is very concerned about the domestic political situation and believes the Thai market now is likely to stay below 1 million units this year, well down from the 1.13 million it originally predicted.

Pitak says Honda has also cut its sales forecast to 160,000 units from 180,000.

But despite the political turmoil in Thailand and its accompanying plunge in new-vehicle sales, the Thailand Automotive Institute believes at least eight of the 10 automakers that applied to invest in the second phase of the eco-car program will proceed with their plans.

Institute President Vichai Jirathiyut says he remains confident the country's aim to build 3 million units a year by 2017 will not be hard to accomplish despite the military coup.

The 10 applicants pledged a combined investment of TB138.89 billion ($4.26 billion) and additional production volume of 1.58 million units a year.

Five of the 10 – Nissan, Honda, Mitsubishi, Suzuki and Toyota – took part in the original eco-car program, while MG, Ford, Chevrolet, Mazda and Volkswagen are newcomers.

Vichai tells The Nation he has spoken with executives of many automotive companies and they say they still view Thailand's political crisis as a temporary situation, and the sooner it is resolved, the quicker they will be able to proceed.

Research firm Frost & Sullivan Associate Director Dushyant Sinha says the political situation could result in automakers deciding not to invest in Thailand.

“A more direct impact is on consumer confidence which, coupled with general uncertainty and tighter financing, has adversely impacted consumer spending,” Dushyant tells the newspaper.

Vichai is concerned about any delay in building automotive testing facilities and proving grounds, which formed part of the national automotive-sector master plan. The facilities are seen as an important strategy in promoting Thailand as a global automobile-production hub.

The institute is seeking TB8 billion ($245.5 million) from the Ministry of Industry for the project.

“This project depends very much on the government's support,” Vichai says.

Meantime, Moody’s is predicting the coup will drive Thailand into recession.

The Bangkok Post reports economist Fred Gibson writes in Moody's Analytics that the coup could cause the economy to shrink and the persistent political squabbling also could affect the long-term investment outlook.

“Given recent events we now think the economy will record a second negative quarter in the three months to June, putting it in recession,” Gibson writes.