Honda dealers across Thailand are becoming increasingly concerned for the future of their businesses, as they face a prolonged period of supply disruption due to the floods.
The dealership business typically has high fixed costs, including high initial funding costs as well as expensive land and equipment leasing overheads and personnel costs.
There is a possibility of widespread bankruptcies across the industry, especially those directly affected by the floods, unless Honda provides financial support.
Honda dealers not affected directly by the floods also face a tough six months of severely reduced business due to product supply shortages. Honda networks in other ASEAN countries, including Indonesia, Philippines, Malaysia, which depend heavily on OE parts and built-up vehicles from Thailand, also face a prolonged period of product shortages.
Honda’s regional manufacturing hub in central Thailand has been inundated by flood waters since last month. The extensive damage to equipment means that the plant could be out of action for as long as six months.
The plant has an annual production capacity of 240,000 units and makes the Accord, CR-V, City, Jazz and Brio models. So far this year it has produced 170,000 units.
Components made in Thailand are supplied to car plants as far away as India, Europe, Japan and North America, with Honda and Toyota reporting disruption to operations in these regions.
Honda has asked the government to waver import duties to help support its dealers, although other carmakers have argued that such a measure would be seen as special treatment. The import duty for passenger cars is 80%.
Other vehicle manufacturers face component supply shortages, with a large number of industrial estates across the country inundated by flood waters, although they are likely to recover more quickly.
Mitsubishi expects to resume production in late November while Ford-Mazda, Nissan and Toyota have set mid-November as a tentative restart date for their Thai operations, depending on how quickly the floods recede.