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Thailand's Japanese automotive industry

Asian Business Systems - presentation
by

Péter Rudas

on 31 October 2014

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Transcript of Thailand's Japanese automotive industry

Japanese companies make up 91% of both local production and exports
From trade protection to a major car-producing country
Reasons for success
No own brand (like Proton in Malaysia)
Increased global competition
Favourable economic and policy conditions (ASEAN, AFTA, AICO)
Adaptation of Japanese public-private cooperation
World class automotive clusters
1960s
Trade protection (high tariffs on imports)
Thank you for your attention!

Any questions?
numerous new parts manufactured in new factories and new affiliates such as starter, alternator, magneto, windshield, wiper motor, oil cooler, radiator, fuel filter, rail, injector, supply pump, relay, flasher, oil pressure value, air cleaner filter
Today's situation
Production increased from 411,721 in 2000 to 2,429,142 in 2012
Since the 2000s
2001: ''Detroit of the East'' plan,
establishment of the Thai Automotive Institute
Thailand's Japanese automotive industry
Rémy Bova,
Péter Rudas,
Kultorn Srirungrot

Joint Ventures with
Japanese (setting up assemblies)
American and European brands (no strong interest)
Import substitution policy: 1st industry to receive a specific industrial policy
1970s
balance of trade problems
Imports of Completely Built Up cars banned
Increased investment in parts production
1980s
Liberalizations after 1987!!!
Japanese style labour relations and public-private cooperation
1990s
Bangkok
further liberalization
Low tariffs, dropping market prices, increasing domestic demand and boosted production
1997 financial crisis: restructurings, abolishment of foreign ownership restrictions
Exporting even more! fast recovery of the automobile industry
Japanese development model, strong internationalization
Japanese manufacturers abroad prefer Japanese suppliers

relocation of productions bases to Thailand
(eg. Toyota, $1b+)

not many spillover effects for Thai firms, quality, delivery on time and production capabilities still not sufficient

Toyota, Isuzu, Honda, Renault-Nissan, (Daimler-Chrysler-)Mitsubishi, Mazda&Ford (Auto Alliance)

mostly one-ton pickup models
Thailand: #10 car producing country in 2012
FDI: $10 billion in 2013
World’s second largest production base for one-ton pickups
Appreciation of the yen in 1985 encouraged Japanese and part makers to expand their production in Thailand
Creation of industrial districts and clusters (supporting industries located around them)
Japanese government began to provide various kinds of technical assistance and financial loans to Thailand
Export orientation, industrial decentralization policy
Implementation of the local content requirement (LCR) policy in 1971 requiring car-makers to purchase parts locally
Collaboration among assemblers, implementation of a satellite strategy
Revolution in information and communication technology (ICT)
in the mid-1980s when Thailand began to plan and develop the Eastern Seaboard areas, resulting from the discovery of gas in the Gulf of Siam and the congestion in Bangkok and Samut Prakarn, the most important locations of the automotive industry. The government has successively not only invested heavily in infrastructural services and public utilities, but has also provided a wide range of social services, such as education, health care and the development of recreational facilities in the coastal areas
Intention to increase technology transfers
But:
Limited technology transfer
Japanese car assemblers are not satisfied with the technological capabilities of Thai suppliers (no JIT), knowledge intensive components are not produced in Thailand

(Thailand has the largest domestic demand for vehicles in the region)
many Thai 1st tier suppliers pushed back to 2nd tier
Source: Poapongsakorn Techkanont (2008)
Full transcript