Market Insight: Thailand turns the corner

THE Australian motor industry is watching Thailand closely as the Asian kingdom shrugs off the effects of last year’s devastating floods and a stronger flow of significant new models head this way.

After sales of Thai-built vehicles plunged 70 per cent in December last year from the previous month, only to fall further to just 7356 units in January, improved supplies in recent months have eased some of the backlog of Australian orders, as reflected by the sharp increase in new registrations.

However, Australia is now poised to see the substantial growth in Thai vehicle imports – a trade currently worth $3.17 billion a year – that many industry observers were anticipating prior to the natural disaster.

Thailand still managed to be Australia’s second-largest source of vehicles last year, falling 3.9 per cent as South Korea’s influence fell 10.5 per cent – due in large part to Holden taking on Cruze production, but also to limited supply on certain Korean-brand model lines – and as Australian-built cars, no longer entrenched in second place behind Japan, fell 3.0 per cent, despite the new ‘Aussie’ small car.

While the tables have turned this year due to ongoing effects of the flood disaster, improved supply channels should see a recovery for Honda, which sources the vast majority of its vehicles from Thailand, and a spike in sales for other brands with Thai models in high demand, such as Ford with the Australian-developed Ranger.

Earlier this week, Honda welcomed its first shipment of vehicles from Thailand since floods suspended operations there last October, with supply “returning to normal” from July.

From top: Holden Colorado Honda City Nissan Pulsar Mitsubishi Mirage.

In the interim, the company has embarked on an aggressive strategy to win back market share, dropping prices of its Thai-built Accord and City models, for example, while its all-important CR-V compact SUV will be shipped in from Thailand in the final quarter.

Consider also the forthcoming launch of key new models including the Thai-built Ford Focus, Holden Colorado utility and Colorado 7 SUV, Isuzu Ute’s D-Max and equivalent SUV, the Nissan Almera and, early next year, the all-new Mitsubishi Mirage, revised Toyota HiLux (with a key safety upgrade) and, not least of all, the reborn Nissan Pulsar.

As GoAuto has reported, Nissan is also considering Thailand as the source of next year’s Altima mid-size sedan, while several brands are looking to capitalise on the continuing development and expansion of production facilities in the kingdom.

Among them, Suzuki Australia is studying the prospect of sourcing its top-selling Swift light car and other models from Thailand, taking advantage of reduced freight costs and the free-trade agreement (FTA) forged in 2005.

While last week’s signing of an FTA with Malaysia is expected to have only a minor impact on vehicle sourcing patterns in Australia, free trade with other significant auto-producing nations in our region, including South Korea, China, India and, increasingly, Indonesia – all of which are the subject of ongoing FTA negotiations – will bring further change.

Notwithstanding that the three Australian manufacturers, Toyota, Holden and Ford, are also among our biggest vehicle importers, experience with the Thailand-Australia FTA has the local industry concerned that barriers to entry for Australian car producers and suppliers could continue to remain high with each new deal, when there is no such ‘protection’ at this end.

Automotive envoy Steve Bracks and FCAI chairman (and Ford Australia president) Bob Graziano have both expressed concern recently that, while FTAs are generally welcomed, poor agreements have made it possible for the participating country to introduce punitive motor vehicle excise taxes – as Thailand has done – and other measures that disadvantage Australian companies.

The development of a smaller-displacement (2.7-litre diesel) engine for its Territory SUV has prompted Ford to embark on a low-volume export drive to Thailand, but, as Mr Graziano has made clear, the ongoing penalties still limit export opportunities and the long periods of negotiations involved with FTAs create more uncertainty in the Australian car industry.

As local large-car sales continue to decline, Holden’s Cruze and Toyota’s Camry are this year keeping Australian-built vehicle sales (up 17.1 per cent to the end of April) on an even keel with those from South Korea (down 9.6 per cent) and the flood-hit Thailand (down 25.3 per cent), while Japan has surged 15.1 per cent to reassert its dominance as the prime source of cars for this market.

A deep and sustained decline in Japanese car volumes could only occur with a relocation of mass-sellers such as the Toyota Corolla and Mazda3 – with Thailand the likely beneficiary – coupled with separate moves in the region from these top brands for other high-volume models.

Toyota, for example, is still working on a plan to bring an Asian-sourced light sedan to Australia to sell alongside the latest Yaris hatch.

Yet the position of Japan and Australia still looks certain to destabilise when there are little or no restrictions on supply from Thailand or South Korea, and as emerging markets continue to rise – be it with fledgling brands or global car-makers opening new factories.