It is customary for the president of Toyota Motor Thailand (TMT), the largest auto company in the Kingdom, to serve simultaneously as chairman of the Thai-Japanese Chamber of Commerce.

Mitsuhiro Sonoda, who succeeded high-profile Ryochi Sasaki as the new TMT president, says wearing two hats is a challenging job for him.

In an exclusive interview with The Nation, Sonoda said Thailand needed to improve its human-resources development in order to strengthen its automobile industry.

"In 2006, we started a human-resources development programme using the Japan-Thailand Economic Partnership Agreement (Jtepa), and we have to promote it more in conjunction with the Japanese government," he says.

Thailand is trying to emerge as a regional automobile-production hub despite having to compete against giants like China and India, which at present may not have the technology but do benefit from cheap labour.

"Actually, competition from China and India can be a good driver and competition for us. As far as our operation is concerned, we must raise our competitiveness," he says.

Sonoda says that in the past, TMT would compare its performance with Japan's but now looks at it in terms of China and India's.

However, each country has its own champion product - while India is good with small cars like Marutis and Suzukis, Thailand is the pickup expert.

"Each country has its own advantages," he says.

Jtepa will result in lower tariffs for vehicles and parts imported from Japan. The Japanese parliament will make a final decision on the treaty by the end of the year, with implementation soon after.

But Sonoda says the agreement will contain few benefits for Toyota, due to its 90-per-cent parts localisation.

"We import only the automatic gearbox, 4-x-4 transfer case and steel," he says.

Sonoda says Thailand's parts industry is as healthy as its pickup industry, resulting in a large number of exports.

"On that basis, we have to reinforce our competitiveness against those emerging countries [China and India]," he says. "We need capable and advanced engineers in the fields of materials, electronic and mechanical engineering."

Toyota Motor Asia-Pacific, now headed by Sasaki, was recently set up to support factories in this region and promote better coordination among regional countries.

"In Thailand, we try to develop our own product while local suppliers develop their own parts. This is the most crucial factor for the industry," Sonoda stresses.

While China and India benefits from a strong steel industry, Thailand lags behind in this regard.

"This is important in terms of cost. Steel is a global commodity, the price is global, but the bargaining power and distance of logistics makes the difference," he says, adding that it would be great if Thailand could produce more steel for the auto industry.

In regard to the proposed eco-car project, Sonoda says the market size will not be large enough.

Sonoda said earlier, following a meeting last week between Finance Minister Chalongphob Sussangkarn and 12 auto companies, that the ministry should lower excise tax not only on the small-car segment, but also for all segments. He suggested a regressive rate for the entire industry to boost the passenger-car industry, which has much room for growth given current demand of only 190,000 units a year.

"Promotion should be given to other models as well, in order to get the full benefit," he says.

He says it all depends on the consumers themselves whether they will favour a smaller car.

"Then that would increase the possibility. It's up to customer choice - it's not so big a privilege."

Under the regressive rate applied currently, cars with engine capacities below 2,000cc are subject to a 30-per-cent excise tax.

"Thus, those with smaller engines should be entitled to lower taxes. Then special tax benefits could be awarded to manufacturers who cut their energy consumption or manufacture vehicles that meet Euro IV emission standards."

However, Thailand is caught in a global competition, and the eco-car must be competitive outside of Thailand, too.

"You can look at Proton in Malaysia. It is not competitive, and the Malaysian government needs to promote fairer competition," he says.

"We need R&D as well as product planning in Thailand in order to succeed," he added.

Kingsley Wijayasinha

The Nation