Japanese investors keep the faith in Thailand

Between 19 and 22 June this year the Bangkok International Trade and Exhibition Centre will host a Manufacturing Expo, specifically aimed at the multitude of automotive manufacturers in Thailand and around the East Asian region.

Among those expected to participate in the expo are leading Japanese auto parts manufacturers, many of whom are already on the ground in Thailand, but will be looking to further expand and grow their businesses in the country and within ASEAN.

The organiser of the expo is a company called Reed Tradex and their project director Suttisak Wilanan noted that Japanese auto parts makers consider Thailand to be an appealing marketplace, despite the long-running political problems.

There are currently about 1,800 auto parts manufacturers operating in Thailand and of these 709 are original-equipment manufacturers.

Within ASEAN, Thailand is considered the leader in the manufacture of auto parts. Foreign manufacturers use about 80 to 90 percent locally made auto parts in their pick-ups and around 70 percent in passenger vehicles. All motorcycle parts are made in Thailand.

The Economic Intelligence Centre of Siam Commercial Bank (SCB EIC) has found that heavy competition in Japan and attractive business incentives within the small to medium enterprise (SME) range in Thailand has led many Japanese auto parts makers to set up production lines inside Thailand.

According to the Board of Investment (BoI), Japanese direct investment into Thailand amounted to 136 billion baht in 2012, a substantial rise from 48 billion in 2011 and just 19 billion in 2010.

Japanese SME’s investment covers a wide range of activity from the establishment of wholly-owned subsidiaries to joint ventures with Thai manufacturers. There is certainly none of the usual hubris when talking of Thailand as the Southeast Asian hub for the automotive industry. The numbers back up the rhetoric.

While Indonesia is becoming increasingly attractive to auto makers, the reality is that Thailand still has the inside running when it comes to quality of workmanship and the simple logistics associated with a profitable industry.

There was some concern last year when the import value of auto parts dropped 12.6 percent year-on-year to 15.6 billion baht as local demand in the car market shrank.

Fortunately, this downward trend looks to have been reversed if figures from January are any indication. The Customs Department revealed that import values of mould and die production machinery into Thailand amounted to 1.43 billion baht, which is an 11 percent increase.

This has led industry sources to suggest there is a nice upswing in new investment and expansion within the auto parts market, which augurs well for a strong 2014.