Blog: ASEAN attracts investment
Dave Leggett | 29 June 2010
Ford said last week that it would invest in a new Thailand plant with around 150K annual capacity; manufacture of the Ford Focus is being planned from 2012. Ford's latest investment move illustrates that emerging markets opportunities aren't just about the big markets of the BRICs.
Indeed, the ASEAN region of south-east Asia is continuing to show very positive auto industry growth prospects.
Indonesia's car market is still going strong after a surge in the first quarter. New vehicle sales in Indonesia rose by 69% in May. Our man in Jakarta (Tony Pugliese) tells me that interest rates are low and consumer confidence is relatively high. If they can maintain economic and political stability in Indonesia (and the signs have been good lately), that country's population of 250m can support a very much larger automotive market.
And despite the political unrest in Thailand that was in the news recently, the market there was up by 53% in May. Ford's announcement of a new plant suggests it has concluded that Thailand is a safe bet as a location - but calling this a Thai plant is a slight misnomer. Yes, it is in Thailand but it is perhaps more accurately described as a future ASEAN production facility.
That said, there are some specific advantages for Ford presented by Thailand.
For one thing it already has a manufacturing presence there through its joint venture with Mazda that makes pickups (Ford Ranger). That means it knows the ropes and can take advantage of the supply base that it is by now very familiar with.
But free trade within the ASEAN means that it can export from there very easily too (and the ASEAN itself also has free trade agreements with China and other countries).
The ASEAN bloc of countries has a combined population of approximately 600m people and is seeing strong market growth with the increased motorisation of that population.
Companies need to think about putting capacity in place now to meet future demand requirements in the Asia-Pacific region as a whole. Flexibility in manufacturing and cross-border supply arrangements will also become more important over an extended network of regional production and assembly facilities.
With Ford's plant in Thailand being created for up to 85% exports and with flexibility so that it can relatively easily adjust the model mix, the signs are that Ford is seeing the bigger picture and - on the strength of recent investment announcements for other places too - that it is determined to be ahead of the pack.
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