The Thai automotive sector has bounced back from the Asian economic crisis of 1997. But political instability and a rising eco-consciousness in Asia are having major effects on the market. Mark Bursa reports from the Bangkok Motor Show.
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Thailand’s hotly contested pick-up sector is heading for a showdown. Isuzu, market leader for the past ten years, is facing its strongest challenge so far from archrival Toyota. And with both manufacturers claiming to be ahead with just a few weeks of sales to go, the race will go down to the wire.
In the Toyota corner is the latest Hilux family, the Hilux Vigo, while Isuzu has the all-new D-Max range (sold in the UK as the Rodeo). Both models are locally built – Thailand is home to pick-up production for many brands: as well as Isuzu and Toyota, Mitsubishi, Nissan, Ford, Mazda and Chevrolet all use Thailand as a global source point for 1-tonne pickups.
Thailand’s pick-up predominance – only America makes more of the type – stems from a decision by the Thai government in the 1980s to promote pick-up production rather than setting up “national car” programmes like Malaysia’s Proton. Pick-ups are subject to much lower taxation rates – between 5% and 12%, compared with 18% for SUVs or 41.8% on passenger cars. The government also made diesel-engined pick-ups more tax-efficient; now 100% of Thai pick-up production is diesel-powered.
In the Thai market, Isuzu and Toyota have come to dominate, seizing a combined share of around 70%. Isuzu claims it holds the sector lead; Toyota says it has sold 10,000 more of its pick-ups so far this year than its rival.
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By GlobalDataIn fact both manufacturers will probably end up claiming victory: Isuzu has a range of medium and heavy trucks, and sales of these should make it number one in the overall CV sector – a crown it’s held for 23 years. But the model change for the latest D-Max may well have cost Isuzu the pick-up crown, despite strong initial sales of the new model.
Pick-ups were very much in evidence at the Bangkok motor show, though it’s surprising how the market has become so polarised. Most manufacturers have relatively new offerings: the Ford Ranger is all-new this year, and Mitsubishi’s Triton (L200 in Europe) is only 12 months old. Only Nissan is suffering – the Navara is due next year; for now old Frontier pick-ups are tucked away at the back of the Nissan stand, looking embarrassingly outmoded against their rivals.
Nissan’s local market share has plunged in the past decade. In 1996 it took 21% of the Thai CV market; now it has a mere 7%. And Mitsubishi has also lost ground – from 14% in 1996 and a peak of 16.7% in 2000, Mitsubishi now has only 8%.
Of course, the Thai market has been through the mixer since 1996, with total sales of 591,000 in 1997 falling off a cliff the following year in the wake of the Asian economic crash. Only 144,100 vehicles were sold in 1998 – fewer than in 1980 – and it was not until 2004 that the market clawed its way back to 1997 levels.
Since then the market has boomed – topping 703,500 last year, leading to fears that it’s becoming overheated again. Political instability in Thailand following the military coup that ousted the government of Thaksin Shinawatra, coupled with rises in interest rates and fuel prices and serious flooding in parts of the country, have put the brakes on growth this year. Analysts expect a 2-3% drop in the overall market; Isuzu estimates it will be as low as 680,000 units.
However, analysts believe growth will resume next year. Vallop Tiasiri, director of the Thai Automobile Institute, said the auto industry would improve next year because interest rates are on a downward trend, the political situation is becoming more stable, and fuel prices are likely to be less volatile than this year. Furthermore, the strengthening Thai currency, the Baht, would help reduce the cost of imported raw materials, he said.
He predicted vehicle production would reach 1.3m units next year, with 600,000 units for export. Isuzu believes the Thai market “will top 700,000 units again, as all the negative factors have eased”.
Toyota has been the biggest winner, pushing passenger cars as well as CVs. This has given Toyota an overall market share of 39.5% overall, against Isuzu’s 25.1%. In a distant third is Honda with 8.3% – but this has been achieved without a presence in the dominant pick-up sector.
Indeed, Honda is starting to give Toyota a run for its money in the passenger car sector, where sales are spearheaded by the latest Honda City, a sedan derivative of the Fit/Jazz hatch.
This competes head-on with Toyota’s Vios, itself a booted derivative of the Yaris, which is Toyota’s best-selling Thai car. Toyota has launched the Yaris this year in Thailand – its first hatchback in the country – and the car is selling well. It’s built locally at one of Toyota’s three Thai plants and is selling at a rate of 1,000 cars per month, according to Toyota Motor Thailand executive Surasee Nirundorn.
Toyota has “about a 70% share” of the passenger car sector, and its range includes a number of unusual, Asian-market vehicles including the Fortuner, a Hilux-based SUV that resembles the original Lexus RX300; the Avanza, a utilitarian SUV made in Indonesia; the Innova, a large MPV that replaced the boxy Kijang/Unser in 2005; and the Ventury, a large minivan based on the HiAce van. Toyota showed the Prius hybrid at the show and is considering selling it from next year, Surasee said.
Truck-derived SUVs such as the Fortuner seem to be the next development in the Thai sector. Isuzu has experienced strong sales of its Mu-7, a D-Max-derived SUV launched last year. Isuzu plans to export the car to Europe from 2009, which will allow it to re-enter the SUV sector it abandoned in 2003 when the Trooper went out of production in Japan.
Isuzu has set a modest target of selling around 5,000 Mu-7s in Europe. Currently the company sells only about 16,000 pick-ups, but wants to double this level by the end of the decade, helped by the setting-up of new distributors.
Ford also unveiled a pick-up-based SUV at the show – the Everest shares a platform with the Ranger pick-up. It went on sale in December, and Ford estimates local sales of 300 units a month.
The potential game-changer in the SUV sector is Honda’s new CR-V, also launched at the show. With monocoque construction rather than body-on-chassis, it offers something much less truck-like than its rivals.
Certainly, production of smaller, more fuel-efficient vehicles is something the Thai government wants to encourage. Having spent 20 years developing the pick-up market, there’s a feeling that the big, gas-guzzlers the pick-up plants churn out are increasingly out of step with the needs of the region – especially when other Asian countries such as China, India and Malaysia are focusing increasingly on smaller cars.
The Thai authorities are offering incentives to auto makers that build cars that consume less than 5 litres per 100km (47mpg) and meet Euro 4 emissions standards. But few Thai-assembled vehicles meet these targets, and in any case, Thai consumers still want pick-ups, pick-ups and more pick-ups.
However, there is evidence that automakers may take the bait. The Japanese Nihon Keizai newspaper last month reported that Mazda and Ford were planning to invest $430m in a small-car factory in Thailand that would produce about 200,000 vehicles a year starting in 2009. Mazda won’t confirm or deny the move – but inside sources say the plan is there.
Given Thailand’s expertise in building high volumes at low cost, plus a proven track record in making cars for export to the west, the plan makes sense. It could change the game again in Thailand.
Mark Bursa
