BANGKOK--Despite the heavy damage from flooding last year in Thailand, Japanese automakers are not backing out of that nation.
Just the opposite, in fact, as they are actually investing more in Thailand as it becomes a key production base for their global strategy.
Mitsubishi Motors Corp. began mass production of its global compact car Mirage from April 19 at the newly constructed Laem Chabang plant in southeastern Thailand. The Mirage cars built at the plant will not only be sold in Thailand, but also exported to Southeast Asia, Europe, Australia and the United States. Plans call for manufacturing about 100,000 vehicles at the plant this year, with about 70,000 for export.
The Mirage was at one time the main mass-produced model for Mitsubishi Motors. The name has been revived for the first time in 12 years, and the Thai plant will begin exporting vehicles to Japan from this summer. The Mirage will be a key model for the company's global sales strategy as Mitsubishi Motors plans to sell it in both advanced nations and emerging economies.
The start of its third plant in Thailand means Mitsubishi Motors will expand its annual production capacity there by 150,000 to a total of 460,000. That will mean Thailand becomes an even more important production base for Mitsubishi Motors, which in fiscal 2010 had total worldwide production of about 1.18 million vehicles.
At a ceremony to mark the start of production, Mitsubishi Motors President Osamu Masuko said, "This new plant is one of our most important production bases. I am once again convinced that we can manufacture vehicles in Thailand of the same high quality as those manufactured in Japan. We will send these vehicles out to the global market with complete confidence."
With personnel expenses and the costs for procuring parts much cheaper in Thailand than Japan, Nissan Motor Co. was the first Japanese automaker to switch to a strategy of producing vehicles in Thailand for export to Japan when it began production of its March compact car two years ago. In fiscal 2011, Nissan exported about 50,000 vehicles to Japan from its Thai plant.
The extremely strong yen has hurt the profitability of exports from Japan.
"We no longer have the choice of producing low-priced compact cars in Japan," said Mitsubishi’s Masuko.
Other automakers will likely follow Mitsubishi and its strategy of turning its Mirage into a second March.
Honda Motor Co. was the Japanese automaker that suffered the heaviest damage from last autumn's flooding. Its plant in Ayutthaya province was submerged in up to 2 meters of water.
Honda invested 25.6 billion yen ($314 million) to restore the plant, which returned to full production on April 9, and the company plans to produce 240,000 vehicles there in fiscal 2012, which would be full capacity.
Although flooding continues to be a major risk for any company in Thailand, Honda officials said they had no intention of withdrawing. A major reason is that a large number of auto parts manufacturers with high quality standards have already established bases in Thailand. The quality level of these parts manufacturers is much higher than in any other Asian nation.
Suzuki Motor Corp. began production of its Swift compact car at a new plant in Rayong province in central Thailand in March. Toyota Motor Corp., which has three plants on the outskirts of Bangkok, and Mazda Motor Corp., which has seen sales of its Demio compact increase, also plan to increase production capacity in Thailand.
If the trend of manufacturing vehicles in Thailand for sales in advanced nations should continue, it will become much more difficult for Japanese automakers to maintain their production capacities in Japan.
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