November 15th, 2011
07:48 AM GMT
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While Thailand’s floods offer a golden opportunity for automakers to diversify their investment across the region – hunting down cheaper suppliers in nearby Vietnam or Indonesia – the kingpin of the Thai market, Toyota, has no plans to go anywhere.

“Toyota is so comfortable in Thailand, I don’t see any major move away any time soon,” said auto industry analyst Michael Dunne.

“Thailand is a premier manufacturer without equal.”

Toyota has said it has scrambled to source parts from other manufacturers in the region and it plans to resume production by November 21. It plans to restore output further down the supply chain in North America – currently running at 10% lower than before the flooding – to normal levels in the coming week.

Nevertheless, Thailand is too good a fit for Toyota for it to leave permanently. When the floodwaters recede the automaker has vowed to return.

“Toyota is not considering shrinking its operations here,” Toyota’s president Akio Toyodo said recently. “If anything we hope to expand.”

The floodwaters have, so far, left Toyota’s plants untouched.

Other markets in the region may be gaining ground on Thailand, he explained, but they still have a long way to go to steal a march on Thailand, where infrastructure such as highways and power supply are better developed.

Nevertheless, Indonesia’s growth figures, at 51.1% in 2010, according to the International Organization of Motor Vehicle Manufacturers (OICA), are impressive.

Dunne said Daihatsu recently made a Y20 billion ($260 million) investment in the country.

“Indonesia is on a high right now,” he said. “Its sales are the largest in South East Asia.”

Thailand’s automotive manufacturing output is more than double that of its closest rival Indonesia. Figures from the OICA show Thailand produced 1,644,513 motor vehicles in 2010. This compares with 704,715 vehicles in Indonesia, and just 567,715 for Malaysia.

The impact of Thailand’s floods, meanwhile, are working down the supply chain and are being felt as far away as Jakarta and Detroit, as automakers scale back production and suppliers in one of the world’s most important auto parts hubs struggle to get back on their feet.

“It’s interesting to see the impact,” said Dunne. “Normally Honda in Indonesia would be offering discounts at this time of year, but the margins have been cut so deeply by the floods that they’re having to charge the full price.”

Toyota, Japan’s biggest automaker, says the floods have cost it 150,000 vehicles in lost production – 90,000 in Thailand itself, 40,000 in Japan and the rest across the region.

Analysts estimate that lost vehicle production from the Thai floods may total about 250,000 globally – far fewer than the 700,000 from Japan’s Tsunami disaster in March – but the disasters had the disadvantage of coming on top of each other and were certain to hit the bottom line of all carmakers in 2011.

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soundoff (7 Responses)
  1. Marwan

    Toyota is indeed a truely reliable vehicle...I have been a loyal Toyota 4×4 owner since 1985. Excellent image selection for this article.

    November 15, 2011 at 9:01 am |
  2. ZUZU

    Sory can you ford the magizine of yuar production team!

    November 15, 2011 at 11:02 am |
  3. j. montero

    Good business sense and even probability and statistics teach us not to put all our manufacturing plant in one location where it can be hit by natural or man-made disaster and be totally wiped-out. Having business in several locations guards against this possibility.

    November 15, 2011 at 1:23 pm |
  4. arjay

    Toyota can stay and prepare for next year's flood again. With climate change, this is very probable. First business item would be how to protect against next yera's floods? Against nature? It is very difficult and doubtful in the long run. I would not risk "putting all my eggs in one basket."

    November 16, 2011 at 5:41 am |
  5. Whateva

    arjay – You have no idea what you're talking about. The vast majority of this flood was caused by horrible management by the Thai government. They have flood conditions every year and typically mange them just fine. This year was a bit more than average but the flooding was mostly caused by poor management of the flood lock system that manages the flow of water through Bangkok. It's a delicate process to handle and they messed up. Then they sat around doing nothing while the situation got worse, hoping for it to just go away. They didn't put any real effort into fixing the problem until it was far too late.

    It's not nature, it's stupid people. Thailand could easily handle this issue, even with rising sea levels if they would actually put a decent plan in place and seek the help of companies in countries that know about this sort of thing like the Netherlands and Holland. Instead they try to come up with solutions themselves to show they don't need outside help.

    November 20, 2011 at 8:27 am |
  6. icon set

    It is possible to tell, this :) exception to the rules

    October 4, 2012 at 8:33 pm |
  7. land

    hello!,I really like your writing so much! proportion we keep in touch extra about your post on AOL? I require a specialist on this space to solve my problem. Maybe that's you! Having a look ahead to peer you.

    April 18, 2013 at 9:17 pm |

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