Tata Motors ready with blueprint for Thailand

Tata Motors Thailand is confident of a good start in the pickup arena but competition does not seem too worried, says Ammar Master.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 04 May 2007 Views icon4036 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Tata Motors ready with blueprint for Thailand
Ajit Venkataraman has a huge responsibility on his hands. However, the chief operating officer of Tata Motors Thailand, the 70:30 joint venture between Tata and Bangkok-based Thonburi Automotive Assembly, looks relaxed as he sits down for a chat with this reporter at Thonburi’s Rachadamnoen office close to Bangkok’s Grand Palace.

“The whole region is a land of opportunity for us. Compared to developed markets, there is still room for growth in Thailand and Asean,” he says. It is not going to be easy though. Tata Motors will launch its Sprint one-tonne pickup in the pickup capital of the world and at a time when Thailand is undergoing a political crisis resulting in a disturbing economic downturn.

FLAT MARKET TRENDS

Vehicle sales in 2006 were down three percent with pickups showing a marginal dip of close to one percent. Most automakers expect a flat market this year with total vehicle sales expected to be inching near last year’s 680,000 vehicles. Consumer confidence is clearly down with the air of political uncertainty. Moreover, the situation will only be defused when the new Constitution is drafted, general elections held which will hopefully be at the end of this year, and a newly elected government comes into power.

A second concern is that Tata is entering Thailand very late. Agreed, it started looking at the country almost three years ago. But studying the market, selecting the right product and finding the perfect local partner has taken time. Not to add the fact that all the major global pickup manufacturers have massive operations in the kingdom.

Tri Petch Isuzu Sales, the local arm of Japan’s Isuzu Motors, and Toyota Motors Thailand together control nearly 85 percent of the country’s pickup market. The remainder is fought for between Chevrolet, Ford, Mitsubishi, Mazda and Nissan. “It is very difficult for us to estimate the reaction from the Thai customer to the Tata product because they are quite new to this market. We have to closely watch how they will retail the product,” president, Tri Petch Isuzu Sales, Morikazu Chokki says without looking too worried. After all, Isuzu has been the market leader for the last 23 years!

Venkataraman is unfazed though. “Yes, we are launching pickups initially but we will be introducing any of the other products from our portfolio in the future. However, our first priority is to be successful in this one product before getting into other models,” he stresses.

##### BANGKOK OFFICE

Tata has pegged the project cost of its Thailand operation at Rs 120 crore. Tata Motors Thailand has already set up an office in central Bangkok to kick off the business. On the manufacturing side, it is in the process of buying equipment and bringing in moulds and dies. Production is slated to begin in the third quarter of this year at Thoburi’s assembly plant in Samrong, which is located on the outskirts of Bangkok. The vehicle will be made at Thonburi’s Plant No. 1, which until 1996 was assembling Mercedes-Benz cars and bus chassis, according to business development manager, Thonburi Automotive Assembly, Klaus Peter Hammes.

Thoburi then started building a second assembly plant in the same location. This is where the Mercedes assembly has now moved to since 1996, and so two-thirds of the first plant is now vacant. “We will refurnish this area for Tata Motors. Initially, we will put up assembly for pickups and later for others as and when there are new products. The only common facility will be the paint shop. Otherwise, the Mercedes and Tata setups will be two different operations,” Hammes says.

Traditionally, Thailand has been a market of high horsepower models for commercial vehicles. And so last December, Tata Motors in Mumbai announced that the company would launch the Sprint as a space cab, or extended cab, version and sport a 3.0 litre Dicor engine. But the plan has changed slightly. The Sprint will now have the entire range of single cab, double cab and the space cab variants for the Thailand market. At the same time, the engine is yet to be finalized.

ENGINE OPTIONS

“We will be importing the engine and gearbox from India. We have not yet frozen the engine and currently looking at all options available,” Venkataraman says while reiterating that the engine will not be from the Fiat stable. This is why the Asean content in Tata’s pickup will be limited to over 40 percent. “Our local content has to be substantially higher than this figure because we do not want to have any doubts whether we are meeting the local content,” he adds.

It also helps that certain Tata vendors are global companies as in the case of Johnson Controls, Delphi and Visteon which have operations in Thailand. Meanwhile, certain Indian vendors have expressed interest in the project and are moving to Thailand. Interestingly , Tata Autocomp Systems (TACO), the component business of the Tata group believes that it makes sense to enter Thailand only if there are big numbers to support any investment decision. Further, multinational partners of the TACO companies (like Johnson Controls and Visteon) are already present in Thailand and this could be a stumbling block of sorts, sources told Autocar Professional.

##### GLOBAL SOURCING

Venkataraman adds that Tata Motors is getting into global sourcing in a big way. Therefore, its vendor base (be it Thai or Indian) should be thinking about not only meeting the needs of its Sprint pickup, but the entire model range including passenger cars and trucks Tata has available in India.

Clearly, Tata’s local content is not going to be as high as either the Japanese or American pickup manufacturers in Thailand, which is 80-90 percent. To achieve this rate, it will have to localise the engine and gearbox. For the moment, the company does not plan to localise engines since volumes will have to be high to warrant such an investment.

In the first year, Tata is looking to achieve sales of 5,000 vehicles which will largely come from Thailand. It is only by the third year when it hopes to sell 30,000 vehicles annually. The Sprint is planned for launch in the first quarter of next year. Hammes of Thonburi said that it would not be marketed as a lifestyle product. “It will be a commercial application, a workhorse that is solid, strong and tough,” he explains.

The 40 percent local content gives Tata the opportunity to export its model to Southeast Asia under the Asean free trade area (Afta) scheme. It already has an assembly operation with Malaysia’s DRB-Hicom subsidiary Scott & English for commercial vehicles. This could be redundant once Thailand gets underway. Tata is also looking at small commercial vehicles for the Asean market.

It means that once it has established itself in Thailand, the company could export vehicles to Asean, Australia and Korea. However Hammes quickly cautions, “Don’t think this as a global expansion project. This is the first step for Tata to get a foot out of India.” Agreed, but exports will play a major role if Tata is to achieve its target of selling 30,000 vehicles annually by the third year.

Tata will again face the same competition when it starts exporting vehicles to Asean. All the pickup makers are major exporters to Asean and beyond. For instance Ford Thailand, whose AutoAlliance Thailand (AAT) plant, a joint venture between Ford and Mazda, has an exchange program under the Afta scheme.

CHALLENGE FROM FORD

Under this programme, Ford exports the Ranger pickup from Thailand in exchange for the Focus compact from the Philippines. The Ranger in particular is exported to 130 countries except North America. In fact, Thailand is the regional production hub for Ford’s one-tonne pickup trucks which go to Europe, S America, Middle East, Australia, New Zealand, S Africa and Asean.

Ford and Mazda have invested $1 billion in Thailand and are further increasing capacity at the AAT plant to 200,000 vehicles annually by next year. “Honestly, I do not know much about Tata Motors. To my mind though, they are not a global auto company like a Ford, General Motors, Toyota or Isuzu. So if they enter the market as someone like Thai Rung, it does not bother me,” president, Ford Thailand, Tom Brewer says.

“We are optimistic about Tata and the products they have. They have higher horsepower engines and new commercial vehicles products. European manufacturers have no products in this segment, and so the Japanese are dominating the market. I think Indian products could be a nice challenge to them,” Hammes predicts.
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