By Pooky, Thai Intel’s economics journalist
- Complacency has a way of killing a country’s attractiveness
Taksin, Thailand‘s former Thai prime minister who was ousted by a coup in 2006 and drove out of Thailand on corruption finding by a questionable Thai justice system-said only days after the the Japanese crisis hit, quote: “Thailand should present itself to Japan as a place to seek safe refuge.”
Positively, because of Taksin or not, Thailand began making statements to the effect that Japan would continue to invest in Thailand-particularly in the auto parts industry to support the massive Japanese auto industry in Thailand-as internal Japan auto industry came to a stand-still as a result of natural disaster there.
Subsequently, then the Japanese made statements to the same effect-that Japan would continue to invest in Thailand-even with the crisis in Japan.
But the problem for Thailand-is that it is not just about Thailand and Japan.
But how the Japanese view the globe, increasingly has to do with other country like Thailand as well-like how Japan views China-as an example here.
While Thailand’s royalist, elite and military rulers-have this thing about “Bilateral-ism” the fact is that the globe, increasingly is about “Multilateral-ism.”
Clearly, in the auto and related industry-Japan does not have to locate things like its auto parts industry in Thailand to support its Thai auto industry. Japan can gain a massive economy of scale by taking its auto parts industry to China-and then supply its Thailand’s auto industry through China.
And clearly, the move by a few cutting-edge Thai auto parts maker to invest in auto-parts in China-is both an advantage and threat to Thailand-that can complement the Thai auto industry.
The following is from Seeking Alpha, and it talks about how China is increasingly attractive to Japan-particularly in the auto and related industry.
The following is from Seeking Alpha:
By David Zeiler
Disruptions caused by Japan’s March 11 earthquake and tsunami could further encourage Japanese auto parts makers to relocate factories to China – an eventuality already being driven by explosive growth in the Chinese auto market.
Japan’s Big Three automakers – Toyota Motor Corporation (TM), Honda Motor Co. Ltd. (HMC) and Nissan Motor Co. Ltd. (NSANY.PK) – all already operate assembly plants in China. And while 60% to 70% of the parts those plants need come from within China, the rest must be imported from Japan. So if the assembly plants run out of the parts from Japan, production will halt.
Although no plant in China has yet reached that point – Toyota, Nissan and Honda have all said their factories have enough parts to sustain production for at least two more weeks – the possibility has led some to contemplate a more localized supply chain.
“Companies were not motivated to localize production of key components in China and the quake may change that if they face rising difficulties in the following months in supplying to their China assemblers,” Cheng Xiaodong, the official in charge of vehicle price monitoring at the National Development and Reform Commission, told Bloomberg. “China is the world’s biggest vehicle market and producer and it makes sense for them to do so.”
Still, the migration of auto parts manufacturing to China may be inevitable anyway. More and more automobile production in recent years has moved to China as foreign automakers claw for an advantage in the world’s fastest growing market.
China surpassed the United States in vehicles sold for the first time in 2009 by a tally of 13.6 million to 10.4 million. And yet the pace of growth has remained staggering. The Chinese Industry Association estimates 16.5 million vehicles were sold in 2010.
Sales have slowed somewhat in 2011 – the January-February period saw a modest 10% year-over-year increase compared to 84% growth in the same period in 2010 – but the market remains mostly untapped. Industry analysts say only 41 out of 1,000 Chinese people currently own a car.
The Japanese automakers as a group have about 23% of the Chinese market; each has announced expansion strategies to pick up more. Over the past year, virtually every major automaker in the world has announced plans to expand in China.
Last fall Nissan said it planned to double its manufacturing capacity in China by 2012 with an eye toward boosting its market share from 6% to 10%. Nissan is the top Japanese automaker in China, but its sales had started to lag the overall market because of a lack of capacity.
In February, Toyota announced it had moved up the timetable for the opening of a new auto plant to the end of 2011 from early in 2012.
Among the Big Three U.S. carmakers, General Motors Company (GM) has the strongest presence in China. In 2010, GM enjoyed 29% growth, selling a total of 2.4 million vehicles in China – more than twice Toyota’s total.
GM has even greater ambitions going forward, with plans to introduce 20 new models over the next several years and eventually become a car exporter. Using China’s cheaper labor to build its products for export to other emerging economies could prove a very lucrative strategy.
Ford Motor Company (F) and Chrysler Group LLC have been less successful in the Chinese market, but they’re not sitting still. In January Chrysler announced it would start building the Dodge Caliber in China in cooperation with Fiat S.p.A. (FIATY.PK) and Chinese powerhouse Guangzhou Automobile Group Co. Ltd.
The Shanghai Daily just this week reported that Ford plans to invest $1.1 billion in a new factory expected to open in 2012. Ford also said it would boost powertrain and engine production from 400,000 to 750,000 units.
With so many companies in the fray, Chinese auto buyers may be the only certain winners.
“What it took us 100 years to develop, they will duplicate in eight,” Tim Leuliette of Leuliette Partners, a financial adviser to the Chinese companies, told United Press International.
This article is part of Seeking Alpha’s daily coverage of Global Investing.
See it now, or get a daily update by email.
More articles by Money Morning »
- Business Exit Strategy Intelligence: Cars & chicks crazed Japapese light up remote Thai libraries with “Clean Energy” (thaiintelligentnews.wordpress.com)
- International Relations Intelligence: The Two-Sides of Thailand “Isolationist vs Internationalist” (thaiintelligentnews.wordpress.com)
- Economics Intelligence (4): China’s Influence Over Thailand to “Solidify” Thai of Chinese Ancestry Thai Hold (thaiintelligentnews.wordpress.com)
- News & Analysis: Is ASEAN heading into a “Stag-flationary” period? (thaiintelligentnews.wordpress.com)
- Humanity Intelligence: A foreigner’s life is worthless in Thailand (thaiintelligentnews.wordpress.com)
- Japan earthquake rattles carmakers in China (lookatvietnam.com)
- Guest Post: Sigmund’s Analysis (businessinsider.com)
- Value of New Foreign Investment in Thailand Falls (abcnews.go.com)
- Value of new foreign investment in Thailand falls (seattletimes.nwsource.com)
- Japan Adds to Global Economy Woes (online.wsj.com)
- Quake’s disruptions could hit Kitsap consumers this summer (kitsapsun.com)
- Automakers feel worsening effects of Japan crisis (sfgate.com)
- Automakers feel worsening effects of Japan crisis (seattletimes.nwsource.com)