ASEAN KEY DESTINATIONS
Thailand leads Southeast Asia in vehicles
Half a world away from the cold streets of Michigan, General Motors is getting ready to roll its first diesel engine out of a recently opened factory in eastern Thailand. Nearby, Ford Motor is building a manufacturing plant and Suzuki Motor aims to start producing environmentally friendly cars at a new factory in 2012.
Welcome to the "Detroit of Asia", a vast area 120 kilometers east of Bangkok, where durian orchards have given way to car plants over the past decade and vehicles are made for export to more than 200 countries.
While facing increasing competition as an auto manufacturing hub from countries including India, China and Indonesia, Thailand looks likely to retain its dominant position and win more investment thanks to its low wage costs and strong infrastructure.
"You have a good supplier network," said Martin Apfel, GM's president for Southeast Asian operations. "You really have a lot of experienced suppliers across the board so there's a potential to really localize a lot.
"The fabric is there. You can't just drop an assembly plant into nowhere and think that cars would just magically pop up. There has got to be the right environment that brings high-quality cars," he said.
The automobile cluster in Rayong is a small city, spread across 3,450 acres and packed with 25,000 employees toiling out of mammoth factories including those belonging to nine of the world's top 10 automotive suppliers, including struggling Japanese automakers burdened with a strong yen.
Toyota, Honda, Nissan and Mitsubishi all have sprawling operations in Thailand, drawn by its sizable local market and access to Southeast Asia's 600 million people.
Global vehicle makers committed about 32.5 billion baht ($1.1 billion) to Thailand in 2010, down 20 percent from 2009, but holding up well despite political unrest that disrupted Bangkok for several months early in the year.
Car output was unaffected. Thailand's Board of Investment is confident the country will remain a magnet for overseas auto firms.
"The flow of FDI this year is expected to be as high as 400 billion baht ($13 billion), with automotive and parts being a key sector, led by number one investor Japan," BOI Secretary-General Atchaka Sibunruang said.
However, some analysts say Indonesia, the region's biggest economy, could overtake the Thai market as a regional manufacturing hub by 2014 because of a jump in economic development, growing national wealth and a more stable currency.
Over the next three years, per capita income in Indonesia could rise to $3,000 from about $2,000, fueling demand for vehicles, IHS's Yamamoto said. "Indonesia is not affected that much by the external market," he said.
"Their economy is driven by the domestic market, compared with Thailand, which is much more dependent on exports."
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