Thailand is being referred very often as ‘The Detroit of Asia’, owing to the impressive growth of automotive sector in the country. The automotive industry has been one of the major sectors promoted by the Thai Government its pursuit to transform the country into an industrialized nation. The growth in the automotive manufacturing sector had paved the way for growth in other related industries. The automotive sector contributed about 20 per cent to Thailand’s total manufacturing sales in 2006.. Thailand has also grown to become the largest producer and exporter of automobiles in South-East Asia. In addition, Thailand Government had outlined a major policy to further promote auto parts manufacturing by supporting small and medium enterprises (SMEs) in the sector through credit from state-sponsored financial institutions such as the Small and Medium Enterprise Development Bank of Thailand, as an effort to turn Thailand into truly "The Detroit of Asia" by 2010. Logistics plays a critical role in enabling a leaner and efficient supply chain for the automotive sector, thus offering great opportunities for integrated logistics (or 3PL) services.
Rapid Growth of Automotive Sector
The inception of automotive manufacturing in Thailand could be traced back to 1961, when the first assembly plant opened in the country. Since then, the industry has achieved significant milestones, and during rapid industrial evolution in 1990s, the country has emerged as the preferred car manufacturing hub for the global automotive companies to cater to the Asian markets. The automotive sector’s success in Thailand could be attributed to the country’s strengths related to economy and geography such as.
• Strategic geographical location of being at the centre of Southeast Asian Countries.
• Quick recovery from Asian Financial Crisis and steady economic progress at above 5 percent
• A sizeable domestic market, coupled with neighboring markets, is big enough to absorb rising production volumes.
• Availability of skilled labor to support the industry, and
• Well established presence of allied industries such as auto parts and accessories
As of 2006, there were 15 automobile manufacturing plants, 5 motorcycle manufacturing plants, and several automotive components manufacturing plants in Thailand. While majority of the global automotive companies have a manufacturing presence in Thailand, a few have light assembling and distribution operations.
Figure 1: Global Automotive Majors Operating in Thailand, As of 2006
Source: Frost & Sullivan
The automotive industry in Thailand produced almost 1.2 million vehicles and about 2.1 million motorcycles in 2006. About 60 per cent of production was sold locally while the rest was exported. The vehicles production in Thailand is expected to grow at about 15 percent annually for the next 5 years. The country’s automotive exports for the year 2006 were valued at about US$10.7 billion, a growth of 16 percent over previous year. Thailand’s vehicles exports is also expected to grow at more than 15 per cent for the next five years.
Figure 2: Thai Automotive Industry’s Sales Composition (Units), 2006
