Thailand And Toyota Counting On Each Other

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EXCLUSIVE INTERVIEW

Thailand and Toyota counting on each other

The Nation

BANGKOK: -- Thailand hopes to join the world's top 10 auto producing nations within the next three to four years, and Toyota - the largest auto company in the country - will play a major role in achieving that target.

Kyoichi Tanada, president of Toyota Motor Thailand (TMT), says that auto production of all brands in Thailand is expected to reach a total 2.3 million units in 2012, which would rank it in 12th or 13th place in the world.

"In order to become part of the world's top 10, we need to produce at least 2.5 million vehicles per year and I think that it is possible," he told The Nation's Suthichai Yoon in an exclusive interview.

Tanada said Toyota, as leader of the Thai auto industry, considers the top 10 target as its responsibility, as much as Thailand's. "Thus Toyota's plan is to produce at least 1 million vehicles, or even 1.2 million vehicles, by that time," he added.

However, in order to achieve the goal, the government sector needed to step in and support the industry, either in terms of market or product development, he said.

This year the Thai domestic market could reach a record 1.3 million units, while exports are forecast at 1 million units.

"At the start of the year domestic sales forecast was 1 million units, but it has been raised several times due to dramatic market growth," Tanada said.

Exports have also expanded dramatically, up from 750,000 units last year to a forecast 1 million units for 2012. During the next three to four years the national export target is 1.5 million units per year, but this would require government support, especially in terms of foreign exchange.

"The exchange rate of Bt31 per US dollar is favourable, and Bt30 is acceptable, but Bt29 would cause trouble since there would be no benefits or profits," Tanada said.

Another concern for the Thai auto industry is the lack of skilled personnel, particularly engineers and technicians. "The government should step in and solve this problem in order to raise the production and export capability," he said.

Thailand is considered a major auto production centre, but the role of Thais involved in the vehicle development stage such as design, is minute. "Toyota wants more Thai people to participate in this stage, but the problem is a lack of engineers," Tanada said.

And as the domestic market expands, another problem pending is the lack of technicians for after-sales servicing as well as logistics.

"Logistics is another important issue since it significantly affects the cost of the product. In addition, a good logistics system would also play an important role in market expansion, especially when the Asean Economic Community (AEC) kicks off in 2015," he said.

However, advent of the AEC will also cause difficulties among Thai parts manufacturers, mainly SMEs, due to production costs higher than in other AEC member countries. Auto manufacturers have a policy of obtaining parts from the cheapest source, and if Thai firms are unable to maintain their advantage, the market could be lost.

"The higher expense partly comes from labour costs, and the present Bt300 minimum wage is higher than in Laos, Myanmar, Cambodia or Vietnam," Tanada said. "This is why Thai SMEs need to quickly develop themselves in terms of personnel. This would help them produce higher quality products as well as raise production efficiency, so they could lower production costs," he explained.

"At present, vehicles produced in Thailand depend mainly on locally-produced parts, but after AEC begins, Thailand's neighbours will develop themselves in order to expand their market. So Thailand, as leader of the automobile and auto parts industry in the region, needs to maintain its strengths," he said.

The Asean economic community, meanwhile, would benefit large companies. "The market will be much larger for us. Instead of 60 million people, we will have more than 600 million people due to the lifting of the import tax barrier," he said.

This is approximately half of the Indian market and 40 per cent of the Chinese market where 10 million vehicles are sold per year.

Presently, Asean auto sales reach 3.3 million units a year, but Tanada said there was much potential for growth. "During the next 3-4 years Asean auto production could grow to 5 million units per year," he said.

Apart from the AEC, market saturation in Europe (as well as the financial crisis) and other major markets, has caused auto-makers to turn towards the Asia-Pacific region, he said.

This year Toyota plans to sell 500,000 vehicles in Thailand and 400,000 vehicles in Indonesia.

"For just two Asean countries we have combined sales of 900,000 units. But in [all of] Europe, we plan to sell just 800,000 vehicles this year," Tanada said.

The AEC would enable Thailand to export more vehicles to neighbouring countries, since Thailand is the strongest player in the region.

"This has raised concerns for other countries. For example, the Vietnamese government has asked Toyota to maintain its production line in Vietnam, but from Toyota's point of view, we would like to export cars from Thailand to Vietnam," he admitted.

Toyota has three assembly plants in Thailand with a combined production capacity of 800,000 units. It also has plants in Indonesia (150,000 units/year), Malaysia (70,000 units/year), the Philippines (30,000 units/year) and Vietnam (30,000 units/year). The company will also raise production capability in Thailand to 880,000 units per year - by restoring production at the Thai Auto Works plant at the end of this year and building a second plant at the Gateway Industrial Park in the middle of next year.

-- The Nation 2012-09-17

[jerrysteve]

but, but,but, BMA urged people stop driving

Lack of skilled labor, engineers, lack of English....etc etc etc.

Perhaps Burma would be a better choice.

Edited September 17, 2012 by jerrysteve

[takatukaland]

I wonder how much Toyota pays to Thai government to keep taxes high for Benz,BMW Peugeot,Fiat etc

[Mosha]

I wonder if they are counting on the government to keep their factories dry?

[Thai at Heart]

I wonder how much Toyota pays to Thai government to keep taxes high for Benz,BMW Peugeot,Fiat etc

On the basis that many business owners declare virtually zero tax whatsoever, getting a couple of million back by taxing them on their cars is about the only way to get them to pay anything. If they generate 1mn tax on a car, that is equivalent to the owner declaring personal income of about 130k USD. Do the maths and check how many people declare personal income of that number in the country?

[IsaanAussie]

I worked in the automotive industry for many years and Toyota here is IMHO a guiding light for a developing auto making nation. When I first came here the local SME components people proudly stated they achieved defect ratios as low as 1%, fair too high for the global single digit parts per million standards required. Toyota has aided those components in getting up to speed and even invested in some to bridge the technology gaps. They worked very hard supporting the Thai Auto Institute and the industry with training programs and supplied training to those who needed it. Have been very active on environmental impact issues and a responsible corporate citizen in cultural, community support and educational issues.

Obviously Toyota is a "for profit" company, but without their assistance here I fail to see how the enormous industry growth here could have been achieved.

The IMV project which spawned the Hilux and variations across the globe, shifted the production of small pickups from Japan to Thailand, supply base and all.

When the President of TMT speaks, it is a smart idea to listen very carefully and act promptly.

[Markaew]

I generally don't buy anything made in Thailand because of quality issues and they just don't last beyond 3 to 6 months. I will be adding Toyota to the list.

[zakk9]

"This year the Thai domestic market could reach a record 1.3 million units, ..."

Unfortunately, selling as many cars as possible on the domestic Thai market seems to be the mutual goal of the government and the car industry. Creating an efficient transport system for most people in Thailand seems to be rather far down on the priority list.

[steveyinasia]

I wonder if Toyota are also counting on Thailand for excellent after sales service. If my experience from the Toyota dealer at Pracha Chuen 26 is anything to go by, they should consider closing down operations. Not only was their service appalling, they lied about the car being ready after a week, it took another week to finish and in true Thai fashion, blamed another dealer for the delay. Given that they only gave them to car after a week, which was in for a 25,000km service(basically pump up the tyre and change the oil), car was delivered to them on the Sunday prior. Utterly useless.

[ramrod711]

Another concern for the Thai auto industry is the lack of skilled personnel, particularly engineers and technicians. "The government should step in and solve this problem in order to raise the production and export capability," he said.

Thailand is considered a major auto production centre, but the role of Thais involved in the vehicle development stage such as design, is minute. "Toyota wants more Thai people to participate in this stage, but the problem is a lack of engineers," Tanada said.

And as the domestic market expands, another problem pending is the lack of technicians for after-sales servicing as well as logistics

In Canada , Honda has a program in the high schools. They recruit the best and the brightest in the automotive classes and train them fot their shops. I don't know if they do anything like that here, but I do know there are some very good mechanics in some of the small Thai shops.

[Thai at Heart]

"This year the Thai domestic market could reach a record 1.3 million units, ..."

Unfortunately, selling as many cars as possible on the domestic Thai market seems to be the mutual goal of the government and the car industry. Creating an efficient transport system for most people in Thailand seems to be rather far down on the priority list.

It is a cheap and quick way to get taxes generated, by excise duties.

People cheat their income tax, plenty of business has no VAT attached. Buy a 700k car, and happily donate a nice big wedge of money to the taxman. Then put more cars on the road, and happily collect the excise, and other taxes from the pump, and then beyond that get a nice dividend back from PTT.

[rfukata]

"This year the Thai domestic market could reach a record 1.3 million units, ..."

Unfortunately, selling as many cars as possible on the domestic Thai market seems to be the mutual goal of the government and the car industry. Creating an efficient transport system for most people in Thailand seems to be rather far down on the priority list.

yes, have to agree.

Also, Toyota or any leading motor vehicle industry needs to further educate the 'government' for traffic driving safety, and make sure

the government executes fully these safety issues.

[IsaanUSA]

I wonder if the protests in China have anything to do with this

[markt7081]

I worked in the automotive industry for many years and Toyota here is IMHO a guiding light for a developing auto making nation. When I first came here the local SME components people proudly stated they achieved defect ratios as low as 1%, fair too high for the global single digit parts per million standards required. Toyota has aided those components in getting up to speed and even invested in some to bridge the technology gaps. They worked very hard supporting the Thai Auto Institute and the industry with training programs and supplied training to those who needed it. Have been very active on environmental impact issues and a responsible corporate citizen in cultural, community support and educational issues.

Obviously Toyota is a "for profit" company, but without their assistance here I fail to see how the enormous industry growth here could have been achieved.

The IMV project which spawned the Hilux and variations across the globe, shifted the production of small pickups from Japan to Thailand, supply base and all.

When the President of TMT speaks, it is a smart idea to listen very carefully and act promptly.

I too have worked in the auto industry for (too) many years.

The points you make are valid, however I dont subscribe to the view that Toyota are some sort of demi gods, due to their excellent PR B/S.

I open the other eye & remember the lies told to the American public.

Even here in Thailand, they bought pallets of blank police fine books of a BIB, so they could be excused their normal weekly transport fines, coz the cops thought they already had been given it. This got an article in the paper & a small slot on TV, before it mysteriously dissapeared from the press, about 3 years ago.

They are very responsible until they get caught out, then they just say sorry & its all OK again !

[IsaanAussie]

I understand the comments made here but with respect I think a wider perspective should be taken. Today much of the design and engineering is undertaken by the vendor of the parts concerns. This can involve no only the system or assembly of components right down to a detail part made by a third tier supplier. The Toyota issues in USA should never have occured by it demonstrates that even the TMS system still has room for improvement.

Local vehicle operations compete for volume with others manufacturing the same products. Australian Toyota competed for the Hilux project. Mitsubishi almost resited their pickup assembly to South America. With all the supportimg manufacturing industry and export earning a major vehicle plant brings to a country, it is easily understood that governments compete to attract motor company and supplier investments. Part of maintaining parent company interest for a local assembly plant is having a large local market for the product. The more vehicles sold here the safer the future is.

Toyota has a training program here and an engineering centre, other companies such as Ford use subcontract sources to do variant development work here. GM use Holdens design facility in Australia.

The important thing to remember is major redesigns for vehicles are not an every day thing. Usually a frantic year or so that only happens every eight to ten years. If each company had complete vehicle system design and engineering capacity inhouse what would those people do for the six to eight years in between peaks?