2013: Another challenging year for industry

Production target set at 2.5 million vehicles, but this may rise to 2.7 million

Thailand's automobile industry sped ahead with many important achievements in 2012, ranging from production of more than 2 million vehicles to domestic sales of over 1.4 million.

This has helped the country to become the world's 10th largest auto producer five years before the target set by both the government and private sector.

Well, 2013 is another challenging year for the industry. The Auto Industry Club of the Federation of Thai Industries and the Thai Automotive Industry Association both believe that auto companies are firmly on the road to maximising production in order to satisfy demand, especially those generated by the government's First Car Buyer Programme. The scheme had attracted 1.25 million applications for tax rebates, which blew the top off previous forecasts.

This year, the total production target has been set at 2.5 million vehicles, but we could see as many as 2.7 million being produced depending on the potential of each manufacturer.

Last year was a historic year indeed for the country's auto industry due to the First Car programme. But the scheme has also been blamed for distorting the auto market, despite the fact that everyone seems to be happy about it.

Japanese auto-maker Honda is one of the brands that had been significantly helped by the programme. It had just recovered from the destructive 2011 flood that forced it to shut down its Ayutthaya plant for months, and after reopening the plant in April 2012, the carmaker quickly took advantage of the First Car scheme, introducing six models - the Brio, Brio Amaze (launched in December), Jazz, Jazz Hybrid, City and City CNG.

This allowed Honda to become the best-selling car brand in the market for two months. From April to November last year, it produced 150,000 vehicles and had a 15-per-cent market share (30 per cent in the car segment). It also became the No 2 car brand during some months in 2012.

This is a clear signal that Honda will maintain its sizzling performance in 2013 and strengthen its position in the Thai auto market.

Honda Automobile (Thailand) senior vice president Pitak Pruittisarikorn said that since production at its Rojana plant resumed on March 31, Honda enjoyed tremendous growth thanks to a powerful and swift marketing offence.

Although demand is expected to weaken due to the end of the First Car scheme, Honda still has aggressive plans and has set a sales target of 200,000 vehicles from a total market of 1.2 million.

Last year Honda introduced a total of 10 models (three imported) and sold more than 170,000 vehicles to grab a market share of 12-13 per cent.

"We still have more than 100,000 back orders or about six months of production to meet orders, with most being the City and City CNG," he said, adding that his company has raised production from 1,000 to 1,100 vehicles per day to speed up delivery.

Honda is also planning to increase the number of showrooms from 165 to 200 this year, and plans to raise production to 1,200 vehicles per day during the fourth quarter of 2013.

Although Honda seems to have launched all its important models last year, it still has more up its sleeve for 2013, including the Civic Hybrid and the all-new Accord. The company is besides planning to make an important announcement concerning investments in Thailand. Although not official yet, there have been reports of Honda filing applications with the BOI for further investment of Bt20 billion to support production of 120,000 vehicles per year.

Industry sources say Honda has not made an official announcement because it needs to wait for an announcement from the parent company in Japan. Honda Japan will need some time to carefully consider the investment, which will make Thailand a production and export base for the company's hybrid vehicles.

Furthermore, it is highly possible that Honda may increase the amount of investment by pulling part of the funds planned for Indonesia and using the money in Thailand. Meanwhile, it must also make changes to its production in order to exchange certain models with Indonesia.

"We are a listed company and making announcements before the right time may cause some effects. But most importantly, Honda is adjusting plans once again in order to ensure the best results. The strong yen currency is the main reason for this decision and you can be sure of seeing Honda make a big move," he revealed.

Pitak said Honda has already made a big decision in purchasing land in the Eastern Seaboard.

"We have purchased a 2,000-rai plot of land in preparation for major production relocation for a model that has never been produced in Thailand before," he said.

In March last year, Japanese newspaper Nikkei Shimbun reported that Honda would build a new assembly plant in Thailand. It stated that the new facility would be located in the lower eastern region, which has a low risk in terms of flooding.

The new plant will have an initial capacity of 120,000 vehicles per year and will be operational in 2015, while the plants in Ayutthaya will continue producing 240,000 vehicles each year.

Honda is also planning to build a new assembly plant in Indonesia, raising its total production capacity to 180,000 vehicles per year.

It is clear that Honda wants to assemble hybrid vehicles in Thailand. Company executives have been saying that they believe in the potential of the Kingdom as a production base for hybrid vehicles, but are waiting or tax privileges.

In late 2006, an Asian Honda spokesman said the company planned to assembly hybrid vehicles in Thailand, representing the first hybrid production for Honda outside Japan. The reason for the overseas production is the large demand for hybrid vehicles amidst continuously rising fuel prices.

The carmaker has been planning hybrid production in Thailand for a long time, perhaps when it announced the setting up of an R&D centre in 2005. Fumihiko Ike, the president and CEO of Asian Honda at the time, said the opening of Honda R&D Asia-Pacific (HRAP) was a historic step for the company in Thailand and displayed its commitment to the country.

HRAP required an investment of Bt200 million. It serves as a centre for product and parts development and testing, as well as purchasing, for 19 markets in the Asia-Pacific region.