Lessons to be learnt from Thai experience


WHILE Thailand does not have a home-grown car brand, it has firmly established itself as the centre for the Asean automotive industry.  

Over the years, it has not only attracted big players into its car manufacturing hub in Rayong but had turned the industry into a major export earner.  

Toyota for instance, had shifted most of its research and development facility to Thailand and recently announced additional investment of US$750mil there.  

Other manufacturers such Mitsubishi, Ford and Nissan have firmly set foot there and have affirmed further commitment on their investments in Thailand.  

As Thailand continues to attract new investments into its automotive industry, what will the future be for the Malaysian auto industry?  

Will the large presence of foreign car makers in Thailand affect Malaysia's auto industry?  

These questions are important, particularly when the Asean auto market fully opens up under the Asean Free Trade Area (Afta) rules in 2008.  

For the Government and the local players the answers to these questions are in learning from the Thai experience while taking advantage of the opportunities under the present environment.  

According to a senior executive of a major car maker based in Thailand, the country's main advantage over Malaysia was its consistent policy on the auto sector in attracting foreign players, which was reflected in the decision to make the country the car manufacturing centre in the Asean region.  

“Whatever Thailand is experiencing now was culmination of this effort,” he said, adding that for foreign investors, it helped a lot when its government walked the extra mile to ensure that foreign car makers were comfortable in Thailand.  

Thailand had exported some 240,000 cars last year, which showed the policy had worked well in boosting exports and in establishing itself as the biggest car exporter in the region.  

Even with efforts by Proton and Perodua to build their export market, Malaysia's total car exports could not match that of Thailand.  

This gives rise to the argument that the Malaysian Government may have spent too much time developing its local cars and had neglected to develop relationships with some of the foreign manufacturers.  

No one will be more qualified to answer this question than the Government itself. As for the local players though, the growing Asean market could be an advantage, should they play their cards right with their foreign counterparts, even if some of them have already set up their bases in Thailand.  

Being the biggest market of passenger cars, Malaysia could play a larger role in becoming the second hub for foreign manufacturers.  

Car makers such as Volvo have apparently used the concept of having two facilities in both Thailand and Malaysia to support their growing markets.  

Under such an arrangement, Volvo Malaysia produces similar models and exports some of its unfinished cars to Thailand to be “dressed up.”  

Similarly, the Thai counterpart will produce other models and exports their products unfinished to Malaysia.  

Other luxury car makers are believed to be making similar arrangement.  

More recently was the deal involving DaimlerCrysler Malaysia Sdn Bhd and the DRB-Hicom Group to establish more cooperation in the manufacturing of the Mercedes-Benz E-Class sedans, which were already being produced in Thailand.  

Although both parties have not finalised the plan, such a deal could bring in investments of up to RM200mil over the next few years to the local auto industry.  

On the other hand, local players such as Naza Motors Sdn Bhd had tied up with Korean car maker Kia to launch the brand for the Asean market.  

Another Korean car manyfacturer Hyundai, which had left Thailand after the financial crisis, can be lured to use Malaysia as its Asean base.  

Cycle and Carriage Bintang Bhd is taking steps to expand its activities beyond the car assembling of its Mazda marque.  

Honda had also made similar plans with its Malacca plant to complement its manufacturing facilities in Thailand.  

The bottomline is that Malaysia's large domestic market is too good to be ignored by these foreign players, and having manufacturing facilities in Malaysia will enable them to deliver their cars to the local market faster.  

Also, going further down the auto production line, some car component manufacturers can also take advantage of the growing auto market in Thailand.  

One fine example is Ingress Corp Bhd, which had set up a Thai manufacturing unit near the factories of leading automakers in Thailand.  

Some local automobile component producers had also followed Ingress' lead in establishing themselves beyond the Malaysian border.  

In this respect, Proton and Perodua had also geared some of their vendors to compete globally by getting them involved in the early stage of development to allow them to make appropriate business decisions, thus enabling them to cut costs and compete with other vendors. This could be likened to a baby’s first steps, but efforts have been made and a few years down the road, they can be the critical factors that could make or break the Malaysian auto industry.

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