Business Development Asia LLC

South East Asian Automotive News

ISSUE 2, AUGUST 1997



THAILAND



Auto parts makers claim the recent 10% excise tax on two-stroke motorcycles imposed by the Thai Cabinet has cut sales, reduced production and could lead to big layoffs. The country's 1,000 parts makers employ a total of more than 200,000 workers. Sales are expected to total less than one million motorcycles this year, 20-25% less than last year. (June 17th, 1997)

GM Thailand may lower its output forecasts for 1999, the first year of operations of its US$750m car assembly plant in Rayong. According to GM's President for Thailand, Ronald Frizzell, the devalued Baht, high interest rates and a scarcity of hire purchase credit will conspire to dampen sales this year in the domestic auto market. GM plans to export 80% of its production to markets including Japan and Australia. The Rayong plant will produce 100,000-150,000 units in its first phase of operation. GM is also keen to develop an effective network of distributors for Thailand. It already markets Opel Campo pickups in Thailand and will soon introduce the Opel Vectra, produced by Holden, GM's subsidiary in Australia. (July 28th, 1997)

Kobe CH Wire, a JV between Kobe Steel, Mahajak Autoparts, Shinsho Corp., O&K and Nissho Iwai Corp., will process steel wire for the growing auto industry in Thailand. The company will be capitalized at Baht56m (US$1.8m), and will have a monthly production capacity of 1,500 tons of cold heading quality wire, used to make nuts and bolts for cars. (July 31st, 1997)

The Leenutpong family, which through the Yongtrakit Group owns a local assembly factory for CKD BMWs, is being forced to give up control of the wholesale distribution of BMWs in Thailand. BMW Thailand will soon take over the control of a new JV to run the wholesale distribution of BMWs in Thailand. The Leenutpong family's stake will be restricted to 49% of this JV. BMW is focusing on improving the quality and speed of service and on reducing the price of spare parts to win back customer loyalty in Thailand. (July 29th, 1997)

Mercedes-Benz sales in Thailand have cooled off quickly following the economic recession in the country. Mercedes-Benz is usually the luxury car of choice in Asian countries. The current recession has dragged down sales. 13,000 units were sold in 1995, but in 1996 only 7,000 purchases were made. (July 3rd, 1997)

German Luxury Car Sales in Thailand


199519961997 H1
BMW4,7144,0101,499
Mercedes13,0007,0112,923

Source: Thai Motor Society


MMC-Sittipol, a JV between Mitsubishi Corp of Japan and Sittipol Motors of Thailand, has an export target of 40,000 pickups this year, with half of them aimed at Europe. Last year it exported pickups to Turkey, Greece, Israel, Spain and the UK. Mitsubishi has announced that it will soon stop manufacturing pickups in Japan, sourcing exports from Thailand instead. (June 23rd, 1997)

One-ton pickups accounted for 55% of the 589,219 vehicles which were sold in Thailand in 1996. One of the reasons for the pickup's popularity is price; it is the cheapest vehicle in the market, selling for Baht300,000-400,000 (US$12,000-16,000). More than 70% of the parts in Thai pickups are sourced locally. The government classifies pickups as commercial vehicles, therefore exempting them from the 38%-41% excise tax on all locally assembled or imported passenger cars. (June 23rd, 1997)

Shinto Paint of Japan will start local production of rust-inhibitive low-temperature baking-type paint, with the aim of expanding its automobile paint business in Thailand. As the first step, Shinto will embark on paint production for automobile parts, by October this year at the earliest. In addition to this, the company will start operation of a facility for rust inhibitive paint for large car-body frames in mid-1998. (July 10th, 1997)

Siam Cement Metals Products Group, which manufactures auto components, tires and electrical appliance parts, has seen a 25% drop in sales in 1H 1997. The Group supplies components to the Honda, Nissan and Toyota plants in Thailand. In 1996 its sales totaled Baht6.7b (US$260m). The Group is expanding its product range into brake systems as well as engine, gear box and pump components. (July 31st, 1997)

Swedish Motors, the Volvo distributor, is laying off staff to streamline its operation and cut unnecessary costs, said Amanda Currie, Volvo Group marketing manager. Insiders say that 50 people have been laid off, leaving 150 people at head office. (July 29th, 1997)

Takata-TOA, a JV established in 1995 between Takata, a Japanese restraint systems manufacturer, and TOA, a Thai chemicals manufacturer, will begin assembling airbags in Thailand. Initial production at the JV will be 4,000 assemblies per month. (June 24th, 1997)

Thai Yarnyong, the Yongtrakit Group's BMW distributorship, will contribute staff to BMW Thailand's new distribution JV (see above). Boonyarit Pongmehkin, marketing manager of Thai Yarnyong, also stated that given the devalued Baht, the company had decided to stop importing the 5-series as it was now assembling them locally. (July 29th, 1997)

Toyota expects to export 70,000 to 100,000 vehicles annually from Thailand within five years and will increase its investment in auto parts in the wake of the Baht flotation. The company will set up more plants in Thailand to make auto parts to support its export targets for Hilux pick-ups and Soluna passenger cars, and will support policies of the Industry and Education Ministries to train workers for the auto industry. (July 10th, 1997)

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