Thailand's Production Exceeds 2 Million Again

But falls short of target. From only about 500 vehicles produced in 1961, Thailand's automotive manufacturing rose to 2.4 mill...

But falls short of target.

From only about 500 vehicles produced in 1961, Thailand's automotive manufacturing rose to 2.4 million vehicles in 2012, making it the 10th largest automotive manufacturer in the world. Numbers for 2013 have yet to be tabulated, but it is expected to fall short of the 2.55 million target. Could this be a case of too much, too soon?

In 2010, the vehicle production in the Kingdom was only 1.6 million, dropping to 1.4 million in 2011 due to the severe floods that year. But in 2012, production rose by an astounding 70%. We have earlier written about 2 major contributing factors to this mammoth boost – the first car and the eco-car programmes – that have created an artificial and unsustainable demand in the market.

The latest numbers from the Automotive Industry Club of the Federation of Thai Industries showed that 150 000 people who signed up for the first car programmes simply didn’t turn up during vehicle delivery. Automakers have had to design attractive promotions to help dealerships clear their overflowing inventory. So attractive were the new packages that by mid November 2013, 132 000 first car scheme participants, roughly 13%, canceled their orders mostly to take advantage of the latter offers.

The recent Thailand International Motor Expo managed to sell a further 40 000 vehicles, largely due to the attractive promotions. These promotional campaigns are expected to continue until mid 2014, although inventory has already reduced significantly. There is, however, very real concern that such populist strategy is only swiping from future demand and that some of the buyers are realistically not financially able to maintain a car loan.

Phase 2 of the eco-car policy will continue despite qualms of oversupply, with production commencement expected in 2015. By 2017, the government expects a combined eco-car manufacturing capacity of at least 935 000 units annually, 70% of which are to be exported; the question that remains to be answered is ‘where to’?

Like we mentioned earlier, perhaps the country’s race to the top of the global list of automotive manufacturers is happening too fast. One comforting detail is that Thailand is surrounded by neighbouring countries which are relatively untapped markets, like Cambodia and the newly opened Myanmar. In these countries, however, it is less about being eco-friendly, but about being bank account-friendly.

image: Wikipedia

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