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Another Factory Shutdown! Japanese Car Companies “Lost” in Thailand?

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Thailand automobile industry

Thailand is facing the daunting challenge of a wave of factory closures

Japanese automaker Honda Motor announced last week that it plans to stop car production at its plant in Thailand’s Ayutthaya province by 2025, Reuters reports. Not long ago, Japanese automakers Suzuki Motor and Subaru Motor also both announced that they would close their Thai factories.

The move highlights the tough situation faced by Japanese carmakers in the Thai market, where on one hand consumer demand for electric cars is growing and Japanese fuel car production capacity is already in excess; on the other hand, Chinese brands are aggressively entering the Thai market to capture market share.

Three plant closures announced in three months

In May of this year, according to foreign media reports, the Subaru Thailand plant could not sustain its operations and chose to close due to the continued decline in sales of Subaru cars in Thailand, insufficient production and inefficiency leading to widening deficits.

It is reported that the plant covers an area of 100,000 square meters, with a total investment of nearly 5 billion baht, 400 employees including locals and expatriates, and a maximum capacity of 100,000 vehicles per year. However, Subaru’s sales in Thailand topped out at 3,952 units in 2019, and sales in 2024 are expected to be below 1,000 units.

A month later, Suzuki Motor announced on June 7, will be closed before the end of next year in Thailand Rayong Province production plant, stop producing cars and trucks in Thailand, the follow-up will focus on resources in other regions to produce electric cars and hybrid vehicles.

According to the latest reports, Suzuki Motor Thailand Rayong Province plant mainly produces Swift, Ciaz and CELERIO models, 2023 production of only 7,579 units, capacity utilization rate of only 12.6%, always failed to reach the target of annual production of 60,000 cars. Suzuki Motor said it will continue to retain sales and after-sales service after the closure of the Thai plant and plans to continue sales and after-sales service in Thailand by importing cars from other plants in the ASEAN region, Japan and India.

Another month has passed and Honda Motor said on July 9 that it will stop vehicle production at its Ayutthaya plant in Thailand by 2025, as the company plans to consolidate its Thai production to its Bachan Phu plant. Thereafter, the Ayutthaya plant will start producing auto parts.

Honda’s Thailand plant is halting production for similar reasons as Subaru and Suzuki. Honda’s vehicle production in Thailand declined from 228,000 units in 2019 to less than 150,000 per year in 2023, Honda Motor said. Honda’s car sales in Thailand have also been below 100,000 units during the same period. According to the spokesperson, Honda Motor wants to eliminate the gap in car production and sales seen in Thailand.

Thailand’s automotive market is changing

The above three Japanese car companies in the Thai market “failure to return”, more or less related to the rise of Chinese car companies.

At present, the Southeast Asian automobile market is growing rapidly, consumer demand for new technology continues to improve, the development of new energy vehicles show a favorable trend. A number of Chinese car companies have begun to layout the localized production in Thailand. For example, BYD, Great Wall and SAIC MG have announced plans to build factories in Thailand, while Ne Zha Auto has already started production in Thailand. Localized production will help reduce costs and selling prices, and will continue to drive the popularity of Chinese EVs in Thailand.

BYD cars

Previously, Thailand’s auto market had been dominated by Japanese cars, but Chinese carmakers more than doubled their share of Thailand’s new car market in 2023, the data showed. And in Thailand’s electric car market, Chinese car companies accounted for 80% of total sales, while Japanese brands accounted for less than 1%. The ferocious attack of Chinese car companies has made Japanese car companies smell danger.

In order to compete with Chinese EVs for the market, a group of Japanese car companies including Toyota, Mitsubishi Motors, and Nissan have implemented preferential car purchase activities locally in Thailand starting in 2023, including 0% loan interest rate, free insurance, and so on.

Thailand’s manufacturing sector in crisis

Indeed, at the macro level, Thailand is facing the daunting challenge of a wave of factory closures.

Thailand closed 488 factories in the first five months of this year, an average of 97 per month, significantly higher than the level of 57 per month in 2021, according to data from Thailand’s Ministry of Industrial Engineering and financial forecasting and analyzing agency, Chuchimi Botarak Research Center (KKP Research). From the beginning of 2023 to the first quarter of 2024, a total of 1,700 factories closed in Thailand, resulting in 42,000 workers losing their jobs.

These factory closures are generally attributed to high production costs and the influx of cheap goods into the market. The Federation of Thai Industries (FTI) has warned that more factories are at risk of closing in the future if production costs such as energy, transportation and interest rates remain high.

Meanwhile, the number of new factories opening in Thailand’s industrial sector is far lower than the number of factories closing, from 150 new ones per month previously to just 50 today.

KKP believes that the international competitiveness of Thailand’s export manufacturing industry is declining. Although the government’s new industry development drive has attracted new energy car companies such as China to invest in Thailand, at the same time, some Japanese car companies have announced the closure of their assembly plants in Thailand.

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