For more information
Call 1-800-351-0222
Call 1-800-351-0222
Business Plan: Thailand Truck Chassis Production Facility
Term Paper ID:27211
Essay Subject:
Assess market size & growth potential for the creation of a production facility in Thailand for the manufacture of chassis & suspension components for pickup trucks.... More...
12 Pages / 2700 Words
7 sources, 11 Citations,
APA Format
$48.00
More Papers on This Topic
Paper Abstract:
Assess market size & growth potential for the creation of a production facility in Thailand for the manufacture of chassis & suspension components for pickup trucks.
Paper Introduction:
INTRODUCTION
The following is a business plan for the creation of a production facility in Thailand to manufacture chassis and suspension components for pickup trucks. Such a facility would be able to make use of the inexpensive and well-trained and motivated work force in Thailand, a work force that includes a large number of workers who have worked for other auto and truck manufacturing plants in that country and who are therefore already trained. The facility would also be well-situated for shipping these components to other parts of Southeast Asia and beyond, serving the growing market throughout that part of the world.
The market size and growth potential in Thailand has been a magnet to auto makers from around the world, and the healthy automobile industry that already exists in Thailand would serve the
Text of the Paper:
The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper.
Underthat law, all vehicles assembled in Thailand are required to have 54percent local content. Ford is joining withMazda for the production of one-ton pickup trucks beginning in 1998. The government has been actively working to attract new business ofthis sort as part of an overall strategy to become a regional hub for themanufacture of cars and trucks, and so the government will offer necessaryassistance and reduce regulations that would prevent entry into thismarket. New entrants areencouraged to enter the market and can do so through a relationshipestablished with customers they supply in other markets (Charukultharvatch,1997). INDUSTRY OVERVIEW The Thai economy has seen an average growth of 8 percent per year forthe past five years, including a dramatic expansion of the middle incomegroup. New car project spawns fears of more traffic woes. Demand for pickup trucks will continue torise with the growth and development of Thailand as an export-orientedmanufacturing economy (Thailand pickup truck market, 1997). General Motors will assemble the German-designed OpelAstra beginning in 1999, and this plant will have an annual capacity of1 , units. Department of Commerce. Somevendors do their sourcing from foreign part manufacturers for parts theyare not capable of manufacturing. GM launches pick-ups in Thai market (1997, April 1 ). Market Research Reports.Washington, D.C.: U.S. The one-ton pickup segment in Thailand issecond only to the U.S. Thailand's car sales in 1997 to be lowest in 5 years. Opportunities are to be found formanufacturers willing to make a strategic commitment to Thailand either forassembly or in the larger components and supporting industries sector(Thailand motor vehicles..., 1997). The health of the industry is seen by thenumber of manufacturers opening new facilities in Thailand, and thedownturn in the Thai economy is not seen as an obstacle and may indeed be aboon by providing a more willing work force. Vehicles produced by Ford, Chrysler, and General Motors, ofcourse, have to meet the requirements of QA 9 (Charukultharvatch, 1997). Peugeot 1,245 .7Isuzu 1,155 .7Kia 211 .1Other (Non-Japanese) 6,876 4. This market is highly competitive, and partsare supplied as genuine parts by the original equipment manufacturers aswell as by independent gray market importers. Other (Japanese) 2,218 1.3 Growth in the pickup truck market is assured over the next severalyears, as noted, and such growth will be greater for pickups than for othervehicles. Such a facility would be able to make use of theinexpensive and well-trained and motivated work force in Thailand, a workforce that includes a large number of workers who have worked for otherauto and truck manufacturing plants in that country and who are thereforealready trained. There is already a system in place for the acquisition of rawmaterials for this type of manufacture, a trained work force, and a healthydistribution and sales sector. In 1996, the parts breakdown for the Thai market was as follows: Sales in 1996 % of marketToyota 51,576 29.9Honda 4 ,328 23.3Mitsubishi 2 ,918 12.1Nissan 12,9 3 7.5Mercedes-Benz 7, 81 4.1Hyundai 6, 5 3.5Volvo 4,767 2.8BMW 4, 8 2.3Volkswagen 3,882 2.2Mazda 2,973 1.7Daewoo 2,91 1.7Opel 2, 3 1.2Ford 1,644 1. INTRODUCTION The following is a business plan for the creation of a productionfacility in Thailand to manufacture chassis and suspension components forpickup trucks. Bangkok is alreadythe most congested and polluted world capital. This situation willonly increase the burden as new entrants arrive and as more assembly plantsare built in Thailand, increasing the demand for parts from local vendors.The growing pickup truck market will mean an increase in demand for partsin that specific segment of the market especially. ASEAN countries have been seeking to strengthen the automotive partsindustry in the region, and to this end they have been implementingregional policies to encourage foreign investment and technology transfer.The components sector is not as mature as the assembly industry. Thailand is already becoming the regional manufacturing center forSoutheast Asia as far as automobile production is concerned, and the markethas expanded by more than 2 percent annually over the last decade.Increased competition resulted in 1991 when the government decided to allowautomobile imports, leading to a decline in vehicle prices. Assemblers keepa list of qualified vendors who are asked to submit bids to supply therequired parts. Another reason for this is the high quality of Thai-made parts.Honda has also been considering making Thailand its production base for one-ton pickup trucks. market in terms of size, and it has been growing atan annual rate of 14 percent for the last six years. GM expects to sell 5, unitsof this truck in 1997, which would account for 75 percent of GM'sautomobile sales in that country. Thailand motor vehicles and automotive component parts. Thailand in fact has been trying to fashion itself as a regional hubfor vehicle production throughout southeast Asia, and thus the proposedfacility would fit with the government's programs and intentions and wouldbe able to draw on the government for support. Japanesekeiretsu companies, however, are well entrenched in the simpler and morelabor intensive autoparts manufacturing sector. References Charukultharvatch, W. Thereason for this was a lessening of sales in the local market, for over thesame period of time the export volume of completely-built vehiclesincreased 638 percent. The current automobile ration stands at 2 to 1, and this meansthat the demand for vehicles in Thailand will continue to grow at a highrate. even an improvement in the economy immediately would only produceincreased sales in 1998, as projected by Isuzu. Department ofCommerce. Thisplant will have an annual capacity of 135, units and will serve as aregional manufacturing center for trucks for both the domestic and theexport markets. A number of auto makers have turned to Thailand as a good place forthe manufacture of motor vehicles, and among the companies have beenseveral Japanese automakers, including Toyota, Honda, Isuzu, Mazda, andMitsubishi. Competition in the pickup market will thus increase greatly over thenext few years, and competition in the production of parts for this marketwill also increase accordingly. However, both Ford andGeneral Motors are establishing regional assembly plants in Thailand, asChrysler has already done, so the market for American parts will increase. These companies have made Thailand their regional productionbase. (1997). The Thai government has to comply with the World Trade Organization'srules and so will lift the local content regulations by July 1998. The one-ton pickup truck market is the largest segment of the vehiclemarket in Thailand, and pickup sales make up 56 percent of the total, whilecar and commercial vehicle sales have a 3 percent and a 124 percent shareof the market. Manufacturers new to Thailand are expected to introducenew models to this market over the next two years. The lasthalf of 1996 began to show this slow growth, expected to carry through1997. Asixteen-year ban on investment in assembling operations was lifted in 1994,and investment in new operations is now encouraged. Figures are available for the size of the overall local parts industryin Thailand and for the uses to which these parts are put. Tariff restructuring is necessary, and tariffreductions are considered likely. Saangyong is going to manufacture 2.9-liter diesel enginepickups in Thailand. CONCLUSION The manufacture of chassis and suspension components is a feasibleprogram in a market that relies so heavily on local vendors and importersfor precisely these sorts of parts. (1997).Market Research Reports. The auto-partsmanufacturing industry in Thailand shows the best capability in the region,and the industry has been able to supply 8 percent of the parts used inpickup trucks and 6 percent of those used in passenger cars. Toyota has the second largest market sharewith a 3 .1 percent share. They are popular as commercial vehicles, but they are also popularamong consumers in the provincial markets where much of the population isstill engaged in agriculture. The trend has been tooffer investment opportunities with more local production of capitalintensive parts requiring high technology, and among the opportunitiesnoted recently are the manufacture of diesel engine components, suspensionand chassis parts, large injection molds and molded parts, press dies, jigsand fixtures, and catalytic converters. There has been some downturn in the pickup truck market in the firstpart of 1997, and production fell 17.57 percent to 17 ,447 units. This includesfacilities producing parts for both automobiles and pickup trucks.Competition has been increasing with the arrival of other manufacturerssuch as Ford, Chrysler, and General Motors, though often these Americancompanies are in a joint operation with a Japanese manufacturer (such asthe joint operations of GM and Mazda). American imports make up less than two percent of the total.American automotive products are viewed positively in terms of both designand quality, but American companies have such a small market share becausethere are few American automobiles in Thailand. COMPETITION As noted above, numerous manufacturers have become entrenched in theThai market, notably Japanese manufacturers who have established a strongpresence both in assembly and in the manufacturing of parts. the Thai governmentapplauded the decision as GM decided to build its plant in Rayong insteadof in the Philippines. Department of Commerce. Today, Thailand is the largest producer and consumer ofautomobiles in southeast Asia, with a record of 5 , units sold in 1995,a number expected to double by the year 2 . There are several factors considered inmaking purchasing decisions: engineering capability, management practice,quality, and price. Competition in the pickup truck market specifically is expected torise as manufacturers try to maximize their gains in this high-growthmarket. Assemblers today place most of theirpurchase orders for original equipment for assembly with local, partsmanufacturers even in cases where such parts are imported. Toyota will launch the Hilux Mighty-X Plus, a larger and morepowerful truck. Xinhua News Agency. The market for replacement parts is considerable given that thereis virtually no scrap market. Isuzu will make minorchanges and add a 2.8 liter turbo-diesel engine to its current model.Nissan will replace its 2.5-liter engine with a 2.7-liter diesel engine.Mitsubishi is adding the Strada, a version with a 2.8-liter engine and four-wheel drive. In recent years, Thailand has also been hostto an influx of U.S. Growth isexpected to be only 2 percent in 1997, with the market increasing to about6 , units per year, compared to about 589, units in 1996. New entrants are expected over the next several years, andexisting companies are expected to develop strategies to defend theirmarket position. Washington, D.C.: U.S. In 197 there were 61 ,4 4registered vehicles in Bangkok, and by 1995 there were more than threemillion. (1997). The strong domestic market for automobiles is one reason for this,and as a result Honda has made Thailand its hub for the Asia/Oceaniaregion. Another issue is long-term relationships, and vendorsmust be willing to work closely over a long period of time with assemblersto increase their prospects for further business. Chrysler beganassembling Jeep Cherokees in Thailand in 1994. Department of Commerce. At the present time, there are some 15 assemblers of originalequipment and another 2 manufacturers producing for the replacementmarket. Isuzu itself expects a 5percent growth in the Thai market, however, and one-third of this growthwill be in sales of one-ton pickup trucks (Thailand's car sales..., 1997). and Korean car makers, and this has only increasedlocal traffic problems (New car project..., 1996). General Motors is currently building a$75 million plant in Rayong in eastern Thailand, though the company hasexperienced a sharp decline in sales there, as can be seen from thefollowing sales figures for passenger vehicles: 1995 5, units 1996 2, units 1997 1,8 unitsGM is trying to change these figures and recently appointed 17 new dealersto sell GM products in Thailand (GM launches pick-ups..., 1997). Investment for regionalassembling operations has been made by Ford, General Motors, and Japaneseand Korean manufacturers. GM will export 8 percent of its output. The practice in Thailand is to replace those parts that are wornor broken and not an entire assembly. This market will grow both in Thailand and in other countries inthe Southeast Asian market. This trend started in the 197 s and sparked theincrease in cars in Thailand. Competition is less fierce among those producing parts primarilybecause the demand is so great so that each manufacturer has to work atfull capacity just to keep up with current orders. (1996, July 27).Inter Press Service English News Wire. Exports are expected to rise even higher this year(6-month auto output..., 1997). citizens andbusinesses incorporated in the United States to engage in business on thesame basis as Thais and exempts them from most of the restrictions onforeign investment imposed by the Alien Business Law of 1972 (Thailandinvestment climate, 1997). Pickup trucks are also popular among first-time vehicle buyers because their price makes them the most affordable ofall vehicles except motorcycles. (1997, February16). General Motors islaunching the Opel Campo in 1997, and Chrysler plans to introduce a 3.1-liter diesel engine Dodge Dakota soon, marketing the product under adifferent name in Thailand. Market Research Reports. Xinhua NewsAgency. (1997). The Japanesedominate this market, and imports from Japan make up 75 percent of thetotal. The market in Thailand is one of free competition. The facility would also be well-situated for shippingthese components to other parts of Southeast Asia and beyond, serving thegrowing market throughout that part of the world. Target Market The import market for automotive parts and accessories is more andmore favorable as Thailand prepares to become the regional manufacturinghub. Isuzu leads the pickup market, and it sold 1 ,536 units in1996 for a 3 .7 percent share. Kai Motors will start local assembling of pickups aswell, and the initial production range is expected to be between 5, and1 , units. Among the Japanesecompanies assembling their product in Thailand are Nissan, Toyota, andHonda, and each is expanding its capacity to meet increased demand(Charukultharvatch, 1997). Japanese companies are also expanding their productlines to produce models with more powerful engines. Thailand investment climate. Most local parts manufacturers are indeed Japanese joint ventureoperations. Market Research Reports.Washington, D.C.: U.S. Each of these elements will benefit theproposed facility. The remainder of the market is divided amongNissan, Mitsubishi, and Mazda. It allows U.S. What would be seen as good news in many countries of the world hasbeen greeted with some concern in Thailand, however. General Motors has faith in the Thai market and has announced that itwill launch its first pickup truck, the Campo, in that market this year.Campo is manufactured by the Isuzu company, and it is the lowest-pricedmodel produced by GM and sold in Thailand. Washington, D.C.: U.S. MARKETING ANALYSIS Demand for Pickup Trucks Automobile sales in Thailand are expected to show their lowest growthrate in five years because of the currently sluggish economy. Health problems have beenassociated with the increased traffic and pollution in Bangkok, and thetraffic itself has been blamed on the fact that the number of vehicles inthe country has increased so greatly. There are also locally-produced "branded" counterfeits on the market, and these are of reasonablequality. Thailand pickup truck market. Expansion of current local parts manufacturersis expected over the next several years, with current manufacturers workingto meet the increasing demand of their clients. The market size and growth potential in Thailand has been a magnet toauto makers from around the world, and the healthy automobile industry thatalready exists in Thailand would serve the needs of the proposed facilityby providing a trained work force, a ready-made shipping system, andconnections to other parts of Southeast Asia where the pickup truck markethas been growing in recent years. In recent years, as sales haveincreased, so has the demand for more professional auto repair services andfor garage and diagnostic equipment (Thailand motor vehicles..., 1997). There are currently no technical orsafety standards in Thailand, but vehicles manufactured there will comemore and more under the ISO 9 standard because the vehicles will beexported. The market in Thailand is changing rapidly enough to create newopportunities for new assemblers to compete throughout the ASEAN region. The Royal Thai government seeks to maintain an open,market-oriented economy that encourages direct foreign investment topromote economic development, employment, and technology transfer.Investment from the United States is governed by the U.S.-Thai Treaty ofAmity and Economic relations of 1966. The Ford plant to produce pickup trucks in associationwith Mazda beginning in 1998 will have an annual output capacity of 135, units. This would mean more jobs and greater economichealth for Thailand, but still many people were fearful that this movewould increase the traffic problems facing the country. Thailand--Automotive parts andaccessories. Higher labor costs in Japancaused many Japanese car companies to move operations to Thailand, wherelabor was cheaper. Among the Korean makes are Kia, Hyundai,Daewoo, and Saangyong, and these companies will start local assembly ofpickups in 1998. Vendors are given the drawings and specifications. Pickup trucks are notsubject to the excise tax because they are seen as vehicles for commercialuse. Other makes account for less than onepercent of the total market. Mazda is developing a new engine for its Thunder model,featuring three valves per cylinder and indirect ignition (Thailand pickuptruck Market, 1997). As noted, mostparts are of Japanese manufacture or through partnerships with Japanesefirms, but the Japanese dominance in this market is under challenge by agrowing number of non-Japanese manufacturers and their parts suppliers.The establishment of regional manufacturing plants for Chrysler, Ford, andGeneral Motors and the successful market entry of Chrysler Jeep assemblywill likely bring significant numbers of parts suppliers for those firmsinto the country. Governmentalpolicy is to make Thailand an export base for automobiles in the region,including to Japan. Such parts may also be useful asreplacement parts in this same type of market. The economy would benefitfrom the creation of this facility and so would be welcome, especially inthe current economic climate where added business would be helpful inaddressing the economic downturn that has affected the region for the lastfew months.
If this paper is not what you are looking for, you can search again:
or
We can write a Custom Essay just for you.
Browse Essays by Subject