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INTERVIEW-Top Thai auto parts maker looks overseas as home market slows
October 27, 2017 / 12:28 PM / 2 months ago

INTERVIEW-Top Thai auto parts maker looks overseas as home market slows

BANGKOK, Oct 27 (Reuters) - Thailand’s biggest auto parts maker Thai Summit Group is looking to a pick-up in revenues from abroad as its domestic market slows, a senior company official told Reuters on Friday.

“We are quite pessimistic about the Thai domestic (automobile) market,” executive vice president Thanathorn Juangroongruangkit said in an interview.

“It’s growing only at about 3-5 percent” due to high consumer debt and political uncertainty, he added.

Thanathorn is the son of company president and chief executive Somporn Juangroongruangkit.

Foreign sources of revenue currently account for 18-20 percent of Thai Summit’s sales, but it expects that ratio to reach 30 percent in 3-5 years, with plants in the United States, India and South Africa driving growth. This year, Thai Summit expects total revenue of 79 billion baht ($2.4 billion).

Thanathorn said the privately-held company was looking to take advantage of the similarity in vehicles produced in Thailand and South Africa.

“Car makers usually import parts from Thailand to assemble cars in South Africa,” he said. Local operators and the South African government want to source more parts domestically, so Thai Summit’s strategy is to preempt this, he added.

The company will begin next year by renting a factory for light manufacturing and eventually build factories for heavier equipment by 2021, spending approximately $100-150 million.

SUVs, pick-up trucks and derivatives made in South Africa also receive tax benefits when exported to Europe thanks to a trade agreement, Thanathorn said, adding the country was a window to other African markets as well in the long run.

EXPORTS DOING WELL

Currently, the United States accounts for over half of Thai Summit’s overseas revenue. Its plants in Michigan and Kentucky are expected to bring in $500 million next year. The company is aiming for U.S. revenue to reach $1 billion within five years.

Revenue from plants in India, meanwhile, is doubling each year, but from a low base of 1.5 billion baht.

Anticipating future trends in the automotive industry, Thai Summit has spent over 400 million baht on testing centres and research and development of lightweight technology.

Thanathorn said the company was producing an aluminium chassis for U.S. electric carmaker Tesla Inc.

Despite a weak domestic market, Thai auto exports are doing well, the executive said.

“Thai auto exports grow with the global economy,” he said, adding a reduction in foreign investment into the country was due to weak demand rather than any loss of competitiveness.

”Cambodia, Vietnam and Myanmar do not have the capacity to pull investment away from Thailand,” Thanathorn said, adding any investment from auto companies in Indonesia and the Philippines would be for market access rather than export capacity.

Thailand is the world’s 13th largest auto exporter, selling over 60 percent of vehicles produced or 1.18 million in total last year. Auto exports account for about 10 percent of the economy and in September reached a two-year high.

Thailand was dubbed the “Detroit of the East” after foreign automakers, particularly Japanese companies like Toyota Motor , Honda Motor and Isuzu set up shop in the 1980s, while Ford, Chrysler and General Motors chose the country mainly to manufacture one-tonne pickup trucks.

$1 = 33.3000 baht Reporting by Chayut Setboonsarng; Editing by Mark Potter

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