Honda delays construction of Thai assembly planthttp://www.marketwatch.com/story/honda-delays-construction-of-thai-assembly-plant-2014-04-30-194853957 In one of the most significant signs yet that Thailand's political turmoil is taking a toll on its all-important auto industry, Japan's Honda Motor Co. said it would delay construction of a $530 million car-assembly plant by at least six months in the Southeast Asian nation.
The delay of the assembly plant, Honda's third in the country, is due to "rapid changes" in Thailand's auto market and the auto maker is trying to "respond and address the change as fast as we can," said Pitak Pruittisarikorn, chief operating officer of Honda Automobile Thailand Co., in an emailed statement.
Mr. Pitak wasn't immediately available to answer additional questions on the delay Wednesday.
Thailand's political stalemate, which has entered its sixth month, is weighing on the country's economy and undermining the appeal of Southeast Asia's largest auto-production hub. In March, Thailand's auto production fell 29% from a year earlier while sales dropped 47% from a year earlier, an auto-industry group reported.
"The political impact is being felt across the board in the auto industry and it affects the supply chain up- and downstream," said Jessada Thongpak, Bangkok-based senior analyst for IHS Automotive. "Some auto makers have delayed launching new models until the political uncertainty clears up and domestic demand improves."
In March, at a Bangkok auto show, Mr. Pitak said determining how many cars to produce in Thailand, Honda's manufacturing hub for Southeast Asia, can be difficult because of the "political uncertainty and the fact that we don't know when it's going to end."
"Consumer spending has declined, both in terms of spending power and the willingness to spend," he said.
Thailand has long been attractive for car production because of its more than 50-year-old auto supply chain and its central location in the region. Yet it was only in the years following the Asian financial crisis of 1997--when Thailand eased regulations and offered generous tax breaks to auto makers--that the country became known as the Detroit of Southeast Asia.
Auto makers including Honda, Toyota Motor Co. and Ford Motor Co. manufacture cars in Thailand for export throughout Southeast Asia, a region that global auto makers expect to be a key engine of growth.
But analysts warn that the political unrest could hurt car sales and jeopardize Thailand's goal of producing 3 million cars by 2017.
Weak domestic demand has already led truck maker Hino Motors Ltd. to warn that it would scale back production in Thailand. Hino's parent, Toyota, has also said it may need to rethink an investment of up to 20 billion baht ($620 million) to expand capacity.
Meanwhile, at least half a dozen auto makers, including General Motors Co., Ford and Toyota, have warned of a sales hit due to the political unrest and the end of a government stimulus for first-time auto buyers. About a dozen foreign manufacturers are also delaying land purchases, said Amata Corp., one of Thailand's largest industrial-park developers, in January.
In addition, some auto makers are delaying the launch of new car models until domestic demand improves, said Mr. Jessada.
Not all companies are mulling a pullback in Thailand. India's biggest auto maker, Tata Motors Ltd., plans to sell trucks imported from South Korea and India this year in Thailand, according to Thai media.
Thailand's robust auto supply chain also can't be easily replicated, making it difficult for auto makers to pack up and leave, analysts say.
Still, Honda's Mr. Pitak said he expects Thailand's overall auto sales in 2014 to drop 25% from last year's 1.33 million cars, a significant revision from earlier this year, when Honda projected a drop of about 15%.
The Japanese auto maker's plan to open a third assembly plant in Thailand was seen as a sign of its confidence that Southeast Asia's swelling middle class would propel demand for cars.
Honda Motor Co. Chief Executive Takanobu Ito, at a July ceremony for the assembly plant in Prachinburi province in eastern Thailand, said the country is "an important R&D and production base and is one of our key markets."
The factory, which was scheduled to begin construction this spring, would have an annual capacity of 120,000 vehicles, bringing Honda's total production capacity in Thailand to 420,000 units by 2015. The plant will manufacture primarily subcompact models for sale in Thailand as well as for export to Southeast Asia, Oceania and the Middle East.