July 7 (Bloomberg) -- Customers coming to Siam Motor Sales’ Bangkok showroom for a Nissan Motor Co. March compact car leave with a place on a five-month waiting list instead.
“Five to 10 people come in every day asking about it,” Wiwat Manuthad, a Siam Motor salesman, said. About 8,000 buyers have ordered the vehicle, which starts at 375,000 baht ($11,600) he said.
Thailand’s auto production is projected to rise 60 percent this year as Nissan, Ford Motor Co. and Toyota Motor Corp. boost output to meet rising domestic and overseas demand. The car industry’s share of the nation’s economy has grown to more than 10 percent, helping offset a slump in tourism after the country’s worst riots in almost two decades earlier this year.
“The government has been consistent in its support for the auto industry and made it a priority, which is why you have seen the industry grow,” Joe Hinrichs, president of Ford’s Asian and African operations, said in an interview. Ford, which has cut its U.S. workforce 47 percent since 2006, plans to make its Focus model at a new $450 million factory in Thailand by 2012.
Thailand’s finance ministry raised its 2010 growth forecast for the second time in three months on June 29 as a recovering global economy lifted overseas shipments, cushioning the economic impact from the political unrest. Gross domestic product may expand 5 percent to 6 percent in 2010, the ministry said.
Thailand’s auto output doubled to 620,116 vehicles in the first five months of 2010, the Thai Automotive Club trade group said May 17. Carmakers restarted idled production lines as global demand recovered from a recession, while Thailand’s economic growth and low borrowing costs boosted demand at home.
Automakers may produce a record 1.6 million vehicles in the country this year, according to Kasikorn Research. Thailand, with a population of 67 million, may be Southeast Asia’s biggest car market this year, with sales rising to 630,000 vehicles from about 550,000 in 2009, according to Westlake Village, California-based research company JD Power & Associates.
Japanese carmakers are shifting some production to Thailand from their domestic plants as the yen gains against the dollar and euro, making exports from Japan less profitable. The yen has strengthened 5.8 percent against the dollar so far this year.
Japan’s currency rose versus 15 of its 16 major counterparts today as speculation the global economy’s recovery will falter boosted demand for the yen’s relative safety.
“I’m really concerned about the strong yen,” Nissan’s Chief Operating Officer Toshiyuki Shiga told reporters today in Tokyo. “If the current condition continues, it will affect domestic production.”
Yokohama-based Nissan fell 2.5 percent to close at 624 yen today in Tokyo trading, extending its decline this year to 23 percent.
Automakers are also taking advantage of Thai tax incentives introduced in 2007 for companies that produce small and fuel-efficient cars. Nissan’s March is among the models that qualify for the program, which has attracted as much as $1.07 billion in investment from five Japanese carmakers so far, according to Thailand’s Board of Investment.
Nissan, Japan’s third-largest carmaker, will produce 90,000 March cars this year in Thailand and plans to export them to other Southeast Asian countries, China, Japan and Australia, the company said on June 30.
The government’s support for carmaking has yielded “great results,” Nissan’s Chief Executive Officer Carlos Ghosn said last month in Bangkok. “Cars exported from Thailand are extremely competitive.”
Toyota, the world’s largest automaker, may also shift more output to the Southeast Asian nation from Japan, the company said June 30.
Toyota assembles the Vigo pickup truck and Fortuner sport-utility vehicles in Thailand for overseas markets such as Australia and the Middle East. The carmaker is running its factory in Samrong, a province within the Bangkok metropolis, at close to full capacity. As many as 1,165 trucks leave the factory each day, with one vehicle rolling off the production line every minute on average.
Toyota, whose subcompact Vios is the best-selling passenger car in Thailand, has raised its sales forecast for the country to 270,000 vehicles this year from an earlier estimate of 250,000, Kyoichi Tanada, president of the carmaker’s Thai unit, said in an interview.
Mitsubishi Motors Corp., which makes Pajero SUVs at its factory in the eastern province of Chonburi, may spend 15 billion baht to build a new Thai plant, the Tokyo-based company said July 5.
Mitsubishi may use the country as a base to make a new small car to be priced at less than 1 million yen ($11,400), President Osamu Masuko said. The carmaker may build as many as 200,000 units of the model in Thailand annually, he said.
GM plans to build a new midsize Chevrolet truck in Thailand for export to Europe and parts of Southeast Asia, Martin Apfel, executive director for the Detroit-based carmaker’s Southeast Asian operations, said on June 30. The company aims to sell at least 100,000 units of the truck in the first year, he said.
Investment by foreign carmakers is helping Thailand’s economy weather a slump in tourism. Tourist arrivals fell 11.8 percent to 815,000 in May as political violence killed 89 people and damaged buildings including Central World, the nation’s biggest shopping mall.
Even as the local car industry grows, it faces rising competition in Southeast Asia from Indonesia and Vietnam, said Vivek Vaidya, automotive and transportation director at research company Frost & Sullivan.
“The two are large markets in themselves, with low penetration of cars and a large population,” Singapore-based Vaidya said in a phone interview.
Nissan said June 29 it will invest $20 million in Indonesia to double annual production in the country to 100,000 vehicles. The carmaker is also considering Indonesia as an export base and will establish a research and development center in the country next year, CEO Ghosn said.
GM aims to reopen an idle factory in Bekasi, Indonesia within the next two years, Apfel said. The plant will produce a 7-seat vehicle tailored for the domestic market and may require about $100 million in new investment, he said.
A large supplier base helps give Thailand an edge over its low-cost manufacturing rivals, Frost & Sullivan’s Vaidya said. The nation has more than 2,300 auto parts manufacturers and dealerships, according to the Board of Investment.
Nissan plans to produce 200,000 cars in Thailand this year, making full use of its existing capacity. The popularity of the March is unprecedented, said Siam Motor’s Manuthad.
“I’ve been in this business for 20 years and have never seen such a popular car,” he said.
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