Why do car manufacturers come to Thailand, not Vietnam?

The fact that large automobile manufacturers from around the world inject large sums of money into making cars with new modern and environmentally-friendly technologies in Thailand has grieved Vietnam automobile industry.

The American Ford Motor Company has announced a new investment package worth $450 million in a new modern automobile factory in Thailand. Prior to that, Japanese Mitsubishi Motors had also decided to invest $450 million in its third factory in Thailand, which will churn out a new generation of environmentally-friendly vehicles. The third factory, to be located near the two existing factories in the west of Thailand, will have the capacity to churn out some 50,000 products per annum, and is expected to wheel its first products off the assembly line in 2012.

Meanwhile, Japanese Suzuki Motors late last year announced a plan to invest $225 million in Thailand, after winning approval from relevant Thai agencies. The manufacturer plans to make small-size environmentally-friendly cars, with the first products expected to come out in March 2012.

In the 1990s, Thailand came to be known as the “Detroit of Asia,” when it successfully developed supporting industries with many enterprises which made car parts and accessories. Despite recent political upheaval, Thailand still trumps many other countries in the region in auto manufacturing, and has caught the eyes of the world’s largest car producers, attracting them to head to Thailand to establish bases.

Michael Pease, General Director of Ford Vietnam, when explaining why Ford Motor chose Thailand, not other countries, said it was because Thailand is the biggest source which can supply car parts and accessories. BOI, a Thai investment promotion agency, has been very active in creating favorable conditions for investors, while the infrastructure of the country is good.

When establishing production bases in Thailand, Ford aims to export the products to the whole region, not only to Thailand, according to Pease.

Fifteen years ago, Thailand, Vietnam and India were chosen by Ford Motor as new destination points in Asia. In Vietnam, a joint venture with investment capital of $102 million was established, in which Ford Motor accounted for 75 percent of capital. After 15 years of operation, the joint venture’s investment capital has increased by $10 million. The joint venture has also set investment plans for the near future, but the plans have proved to be ‘modest’, just several million dollars.

Not only Ford Motor, but other large players in the world automobile industry have also made investment ‘in dribs and drabs’ over the last 15 years in Vietnam, though they all say Vietnam is a market with great potential for development.

During the same time, the number of automobile factories of Ford Motor in Thailand has increased from a factory which manufactured pickup trucks and SUVs to three, with total investment capital of $1 billion. Ford Motor plans to spend $800 million every year to purchase car parts and accessories made in Thailand for the new factory.

Analysts said that if looking at the policies on investment encouragement announced by Thailand recently, one would understand why investors continue coming here. Besides advantages in supporting industries, Thailand’s infrastructure is now offering very attractive tax incentives.

Tags: Vietnam automotive, Vietnam automotive industry