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Published on April 29, 2008

Vijo Vargehse

The Nation

A stronger baht is beginning to put higher pressure on auto companies exporting from Thailand. Mitsuhiro Sonada, president of Toyota Motor Thailand said. Although exports in the first quarter have increased by a huge 71 per cent, profits have not been high.

"This is not a favourable situation for us, when the units exported are so high but profits itself are so low. We will deal with this problem in the next three years. There are steps we need to take to ensure profitability in the long run," Sonada said.

In the first quarter of this year Toyota exported 76,668 units which adds up to a value of Bt31.44 billion. Another Bt11 billion worth of OEM and replacement parts were also exported, up 27.48 per cent from last year. One of the major reasons for the increase in exports was that the Ban Pho plant had not yet started production last year.

"The ideal situation would be to have the baht at 37 to the dollar, but this was not possible anymore.

"We export 50 per cent of what we produce in Thailand, which is a figure we never expected to reach," Sonada said.

Toyota has three production facilities in Thailand - the Gateway, Samrong and Ban Pho which have a production capacity of 200,000, 250,000 and 100,000. The total production capacity of Toyota is 550,000 units. However, the Ban Pho plant has enough land to expand production to 200,000 units.

Toyota uses up to 93 per cent of local content in its products. But Sonada said this figure was not completely accurate as some of the parts that are purchased from suppliers are produced in Japan.

"The idea is to ensure that there is enough technology transfer so that these parts can be produced locally. Denso Thailand has said the company will open a research and development facility in Thailand so that parts can be developed in Thailand," Sonada said.

Besides, Toyota will help second and third tier suppliers learn the Toyota way of production so that efficiency can be increased in these smaller firms.

Another issue was the high quality steel that was being imported from Japan. Sonada said it was promising to see companies such as Nippon steel and JFE invest in Thailand.

The trend for automobiles in Thailand, however, has been changing according to figures seen in the first quarter of this year. Figures show that there has been 39-per-cent growth in the passenger car segment.

"Last year pickups accounted for more than 60 per cent of the Thai auto market. It is possible that this will come down to 55 per cent as more people turn to smaller cars.

"Customers of big pickups with big engines are now turning to more fuel efficient vehicles. The government's decision to decrease the excise tax for E20-capable vehicles and therefore decrease the price of passenger cars has lead to a boost in passenger car sales as well," Sonada said.

He also said about a 50-per-cent split between passenger cars and pickups would be an ideal situation to support the pickup industry in Thailand.

On the topic of alternative fuels, Sonada said the company is currently studying the Corolla with CNG options for the taxi market. Only after this, would the company consider a CNG option for the Vigo pickup.

Toyota is also testing lithium ion batteries in Thailand. These batteries are to be used in the Prius hybrid if the carmaker were to consider producing the vehicle in Thailand.

"Rising oil prices will obviously effect oil importing countries such as Thailand and have a positive impact for oil exporting countries. But Thailand's decision to turn to CNG and ethanol will reduce this impact. If the government sets a clear direction for E85, it will further help this matter," Sonada said.

He said turning to ethanol production in Thailand could become one of the major long-term businesses, like it is in Brazil which produces its own ethanol.

Thailand is one of the few countries that has decided to have a joint strategy of using both Ethanol and CNG.

However, Sonada said it was more likely that ethanol would become more successful as auto-makers begin to make vehicles that are capable of using the fuel.

On being asked about the eco-car, Toyota said the company will start sales of its vehicles in 2012. Other manufacturers that are also set to produce the eco-car will start sales of their vehicles by 2010.

"This is a question of individual business strategies. It's important to remember that the eco-car is a global product and not a local one.

"It's important to ensure that there is a market for the eco-car in foreign markets as well, it's not a question of being the first to sell the eco-car," Sonada said.

Ultimate in Luxury

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