Honda Won't Leave Thailand: Thai Industry Minister

[webfact]

Honda won’t leave Thailand: Thai Minister of Industry

BANGKOK, March 21 --- Thai Industry Minister Pongsvas Svasti on Wednesday affirmed that Japanese automaker Honda will not relocate its production base in Thailand to another country despite huge losses in output during the country’s mega flood late last year.

The affirmation came after Honda announced its investment of U$330 million to expand its production capacity in Indonesia as planned earlier, before the Thai flood crisis. Mr Pongsvas explained that Honda’s annual production capacity in Thailand stood at 240,000 units, almost four times Indonesia’s annual production capacity of 60,000 units.

He added that the investment in the archipelago was only the expanded production of its compact eco-car, the Honda Brio, as a general investment to meet the robust demand because the Indonesian economy has been gradually growing.

Meanwhile, the plant in Thailand alone was able to produce 120,000 Brio eco-cars, excluding other models of Honda automobiles.

The industry minister said the auto company invited him and Prime Minister Yingluck Shinawatra to witness and to officially kick-start its assembly line on March 31 to mark the completion of post-flood rehabilitation.

Previously, the government allowed the company to import zero-tariff cars until June 30 this year to sell to flood-affected people as well as to offset its output losses, aiming to maintain the domestic market share.

Apart from Honda, giant automakers, Suzuki Motor (Thailand) and new investors affirmed their intention to invest and continue using Thailand as their production base, the minister said, adding that some Thailand-based automakers, including Toyota, Nissan, Isuzu and Mitsubishi had announced plans to increase their domestic production capacity.

Referring to recent discussions with the South Korean ambassador to Thailand, Mr Pongsvas said that Korean automobile manufacturers KIA, Daewoo and Ssangyong were currently interested in investing in auto production in Thailand as well.

In a related development, Anchalee Chaleechan, Corporate Communications Division Manager of Asian Honda Motor Co., Ltd, said Indonesia’s total annual car sales stood at 890,000 units as its economy significantly expanded.

She explained that the expansion in the archipelago, which was earlier announced, had been planned before the Thailand’s flood crisis, reiterating that the plan would not affect the company’s investment in Thailand.

The country’s worst flood in decades late 2011 submerged and ravaged industrial estates in the central provinces which house major industrial factories including Honda Automobile (Thailand)'s automobile plant at Rojana Industrial Park in Ayutthaya. As of March 15, 522 of 893 flood-hit industrial plants were fully recovered.

Meanwhile, the Thai Board of Investment (BOI) reported that entrepreneurs had imported machinery and materials worth some Bt80 billion (over $2.67 million) for 303 industrial projects. (MCOT online news)

-- TNA 2012-03-21

[webfact]

AUTOMOBILE

Honda: No plan to leave Thailand

The Nation

BANGKOK: -- Honda Motor on Wednesday reaffirmed its intention to stay in Thailand, citing that the Kingdom will remain the major base for Honda's persence in Asia and Oceania.

A press conference took place today following rumours that Honda is moving its business from Thailand to Indonesia. Honda recently announced an investment of US$337 million in a second plant in Indonesia. The announcement followed the flood which forced the company to suspend production at Ayutthaya’s plant since October, 2011. The plant is scheduled for recommencement later this month.

Honda Automobile (Thailand)’s executives insisted that the expansion of its existing production capacity in Indonesia is part of the company’s long-term development strategy for that market. The plan for the Indonesian expansion was in place well before the flood that affected Honda’s manufacturing plant in Thailand during the second half of 2011.

"Honda has put considerable effort into restoring its Ayutthaya manufacturing plant to resume production. The company is now ready to start up the production line and continue its commitment to growing with Thai society," Honda said in a statement.

It has already invited the media to a press conference and Open House Ceremony with honourable guest, Prime Minister Yingluck Shinawatra; Honda’s Global President & CEO, Takanobu Ito; and Hiroshi Kobayashi, President of Honda Automobile (Thailand).

Honda’s new production plant outside Jakarta will address Indonesia’s booming demand for small automobiles. The new plant, which will be built beside Honda’s existing automobile plant that already produces Jazz, CR-V and Freed models, will produce an Indonesian version of Honda Brio for the local market. The new plant will be operated by PT Honda Prospect Motor (HPM), a joint venture between Honda Motor Co Ltd (51 per cent) and PT Prospect Motor (49 per cent) that was formed in March 1999.

-- The Nation 2012-03-21

[OzMick]

Ask them again after the next flood.

[Nisa]

Ask them again after the next flood.

Or after the next Earthquake, Tsunami, nuclear radiation crisis and energy shortages.

Or ask them again in another 45-years since they have been building vehicles (motorcycles) here that long and near 30 years for autos.

Edited March 21, 2012 by Nisa

[RKASA]

They shut 54 nuke plants in japan - they will start building flood walls here before they even think about leaving.

[Nisa]

They shut 54 nuke plants in japan - they will start building flood walls here before they even think about leaving.

That is so crazy. Not to get off topic here but I can't believe the size of Japan and their shutting this many plants hasn't caused a much greater impact on people in terms of energy. They really do have an impressive and efficient society. However, they can't beat the quality of work for the wages they get in Thailand along with the cheap costs of many other things here in terms of running a manufacturing business.

[givenall]

Ask them again after the next flood.

Yes he is right they are not leaving since no option at this time, but they don’t trust this government and Honda is hedging their bet by starting operation in Malaysia, and in time if they don’t get the productivity because of labor cost or another flood they will leave for sure

[swillowbee]

Oh, no, no, of course not. Honda isn't exiting Thailand ... today.

Building the commercial infrastructure around a major car assembly plant takes time. That includes founding and developing the hundreds of small local companies in the supply chain that produce the thousands of parts that go into assembling a car.

Honda has started the process of building that commercial infrastructure in Indonesia, preparing to exit Thailand as Thailand's low labor advantage (it's only organic commercial distinction) erodes.

Thai officials are whistling past graveyards if they have even a modest understanding of the industry ... I believe they do, but are displaying very typical Thai behavior ... the very childlike quality of denying reality, and probabilities.

The floods probably accelerate the Honda timetable. Another season of flooding will only hasten Honda's mitigation of Thai Cultural Risk (which is: "get out").

Honda is smart. They will play coy with Thailand, extracting every government concession they can while inexorably exiting. Any Honda investments in Thailand will likely be constrained to existing lines (and heralded by Thai officials as a 'resounding success'), but new Honda investments will likely be made outside of the country.

This is an economic evolutionary certainty, occuring in all economies throughout modern times.

The question for Thailand is; what next? ... higher value-added manufacturing? ... the services sector? ... backwards to farming? ... more prostitutes?

Thailand's social, educational, legal, regulatory; political, commercial and civil infrastructure is unprepared to deliver on some of those.

[theblether]

Any decent businessman would keep his options open, and not irritate customers unnecessarily.

However shareholders have a right to consistency of performance, so you can be sure that last years flood debacle is high in the mind of Honda.

I reckon they will be stockpiling components........and keeping an eye on the exits. Just in case.

[sparebox2]

Honda won't leave.

They won't invest a single cent more too.

[Unkomoncents]

Honda won't leave.

They won't invest a single cent more too.

That's exactly right. The days of Thailand's investment potential are over. This article is excellent news for Thailand in purely pragmatic terms, though. Unfortunately, Thailand's much-vaunted status as a point of progress in East Asia has been severely diminished. Funny, because nobody is confused except those with a serious conflict of interest (not serious investors; look at how Malaysia is faring now among Southeast Asia's smartest investment clients). I wouldn't start a business in Thailand if someone offered to pay for it up front (I'll never forget the Italian guy's head on the Rama VIII Bridge a few years ago. When Thailand wants an effective law enforcement body, I will feel comfortable with my money in the country).

Edited March 21, 2012 by Unkomoncents

[OzMick]

Ask them again after the next flood.

Or after the next Earthquake, Tsunami, nuclear radiation crisis and energy shortages.

Or ask them again in another 45-years since they have been building vehicles (motorcycles) here that long and near 30 years for autos.

In a 5 horse race, the smart money would be on the short-priced favourite with a history of wins.

[webfact]

HONDA

Honda's April restart means no plans for relocation

Nalin Viboonchart

The Nation

BANGKOK: -- Honda Automobile (Thailand) will not relocate to Indonesia, as confirmed by its plan to resume operation at the Rojana Industrial Park in Ayutthaya province on April 1, said Industry Minister Pongsvas Svasti.

It was reported a few days ago that Honda would invest US$340 million (Bt10.4 billion) to triple its production capacity in Indonesia to 180,000 units. The investment would serve the growing demand for vehicles in Southeast Asia's largest market, a nation of 200 million. The plant near Jakarta will create 2,000 jobs and commence production in 2014, the report said.

Pongsvas said Honda executives had insisted that the company would maintain its production in Thailand and has no plan to move out of the country. Honda will resume production, which was hit by severe floods in the second half of last year, on April 1.

Honda was the only carmaker hit by directly by the inundation. About 1,000 of its vehicles were swamped at the factory in Rojana Industrial Park. The company's auto production, which has total capacity of 240,000 units per year, was disrupted for nearly six months.

The industry minister said Honda's new factory in Indonesia would serve domestic demand, which is growing very fast, while production in Thailand would continue to serve both the local market and exports. He added that other carmakers besides Honda were still confident to operate in Thailand despite the impact from the floods.

In addition to Honda, Nissan has announced that it will invest in eco-car production in Indonesia. Nissan allocated $400 million to increase its production capacity to 250,000 units by 2014.

According to Indonesia's automotive industry, domestic sales in February grew by 24.2 per cent from the same month last year to 86,407 units. The growth in the automotive industry is attributed to the rising middle class and low interest rates for loans.

-- The Nation 2012-03-22

[Kalbo]

They shut 54 nuke plants in japan - they will start building flood walls here before they even think about leaving.

That is so crazy. Not to get off topic here but I can't believe the size of Japan and their shutting this many plants hasn't caused a much greater impact on people in terms of energy. They really do have an impressive and efficient society. However, they can't beat the quality of work for the wages they get in Thailand along with the cheap costs of many other things here in terms of running a manufacturing business.

You're wrong in saying that the quality of Thai work in relation to the wages cannot be beat, as Indonesia, India etc to name a few, provides far better workers at more or less the same cost of a Thai worker. Thailands' major winning point is it's infrastructure and logistics capability. While nowhere near European or Japanese standards, they are leaps and bounds ahead of the rest of S.E. Asia and India. Couple this with their deep sea ports and very strategic location,along with an attractive lifestyle for their expats, it's not hard to see why most manufactures are staying put. This may all change, however, in the near future, if the current rise of Burma is allowed to continue.

[ratcatcher]

They shut 54 nuke plants in japan - they will start building flood walls here before they even think about leaving.

That is so crazy. Not to get off topic here but I can't believe the size of Japan and their shutting this many plants hasn't caused a much greater impact on people in terms of energy. They really do have an impressive and efficient society. However, they can't beat the quality of work for the wages they get in Thailand along with the cheap costs of many other things here in terms of running a manufacturing business.

You're wrong in saying that the quality of Thai work in relation to the wages cannot be beat, as Indonesia, India etc to name a few, provides far better workers at more or less the same cost of a Thai worker. Thailands' major winning point is it's infrastructure and logistics capability. While nowhere near European or Japanese standards, they are leaps and bounds ahead of the rest of S.E. Asia and India. Couple this with their deep sea ports and very strategic location,along with an attractive lifestyle for their expats, it's not hard to see why most manufactures are staying put. This may all change, however, in the near future, if the current rise of Burma is allowed to continue.

"...if the current rise of Burma is allowed to continue"

And it will be allowed to continue IMHO, there's no going back now..

[Katipo]

Perhaps if it was Honda making the announcement it would have more credibility.

No suprise Honda is testing the waters elsewhere. As I look out of my factory around Hitec Estate I still see more than half the facilities are deserted.... Wavecrest, Sony... Hoya only partially reopened.

[sparebox2]

Indonesia is a better choice country.

It has Tsunami, eaethquake, vocano, etc, which is similar to Japan, so the jap are used to it.

Flood? The Jap are not very familiar with flood.

[belg]

i guess it is basic economics, if honda leaves, they will face the 187 to 328% import tax, game over, who would want an overinflated car ???

[whybother]

Honda won’t leave Thailand

.... Yet.

[TinoThailand]

My Honda was really excited about the good news

By the way, why there is no normal good family care below 400.000,- Baht in a country that they call "cheap" to live.

Just taxes right? Would the goverment want them to leave or help them out while farmers still wait for the compesation for ther losts aswell the people who lost there whole house still wait for 5.000 Baht. Seriously 5.000 Baht!

Aslong as you can make easy debts to get a Honda, Honda will stay right here. Pay debts for a good but cheap transportation aswell to pay the folks in the goverment. It's a win win situation guys

[timewilltell]

They shut 54 nuke plants in japan - they will start building flood walls here before they even think about leaving.

That is so crazy. Not to get off topic here but I can't believe the size of Japan and their shutting this many plants hasn't caused a much greater impact on people in terms of energy. They really do have an impressive and efficient society. However, they can't beat the quality of work for the wages they get in Thailand along with the cheap costs of many other things here in terms of running a manufacturing business.

Does Honda export many cars from here? Maybe it is not that Thailand's workers are so wonderfully efficient, though I am sure their wages are cheap compared to their countries. I wonder if maybe it is more to do with the ludicrous protectionist imPort taxes that require an automaker to locate here to be able to compete in the local market. After all if Honda were not here they could hardly compete with Toyota for instance who are here and as the Honda marque is a middle of the road marque Thais would not be lining up to pay twice or three times the cost of a mid range saloon over its immediate competitors product. The only reason the fantastically expensive top Marques sell here is that Thais put so much importance on 'face' over value and can feel self important to own one, otherwise why waste your money paying 60% or more to the corrupt and self serving government (whichever is in power).

Of course there is a benefit to these protectionist tariffs, most to the Über rich Thais who run big business and somewhat less to the majority of Thai people who would be better employed if Thailand's market were more accessible. ASEAN Economic integration is a start and I hope leads to more foreign investment here, more jobs and training for normal Thais, better conditions and eventually a more cohesive society. There will need to be many measures to ensure Thais are not left behind the other more advanced and better educated workforces with the continuing abysmal introverted and backward corrupt education system.

Thailand does need to get its head out of its proverbial behind and start plans to take advantage of all the opportunities knocking on its door. Regrettably with the current political situation it is hard to see where there is any visionary leader able to put the needs of his country first. For all the pomp and blustering about how much Thais love Thailand, most of its leaders seem intent on screwing as much out of the economy for themselves as possible and despite the damage to this wonderful country most Thais just accept it. If Thais truly love their country it is time for them to say NO to corruption and seek a leadership with more altruistic goals. Would you like to start?