Isuzu's Trucks To Leverage On Thailand Production Base

BMI View : Tripetch Isuzu's second CV plant is expected to increase the company's annual Thai output to 500,000 units eventually. We believe the company's sales will benefit from Thailand rebuilding itself after the2011 floods as well as from the pipeline of infrastructure projects in other ASEAN countries. BMI considers Thailand one of the most attractive auto production hubs in the region and we believe that investments in the auto parts sector will ramp-up going forward, to respond to the recent increases in domestic production by global automakers.

Tripetch Isuzu Sales Co , a Thai subsidiary of Mitsubishi Co , expects its domestic commercial vehicle (CV) sales to reach a record high of 210,000 units in 2012 due to the launch of the Isuzu D-Max pickup in October 2011 and pent-up demand from that year's floods. Furthermore, the company opened its second, THB6.5bn (US$211mn) new plant in October. This plant will produce pick-ups as well as medium and heavy duty trucks. Isuzu plans to raise its Thailand truck production to as much as 500,000 units annually to tap into surging domestic and overseas demand.

BMI has long been bullish on new vehicles sales in Thailand and we have revised our forecasts upwards a couple of times this year, as the strong recovery from the devastating floods of 2011 continues to play out.

We believe that the CV segment will continue to enjoy strong growth rates as the country rebuilds itself after the natural disaster. BMI forecasts CV sales to grow 75% in 2012, to hit 720,000 units. Heavy truck sales, a sub-segment of CV sales are expected to enjoy a higher growth rate of 80% in 2012, to reach 43,000 units due to their low base.

Flood Rebuilding To Lead Recovery
Thailand- Domestic CV Sales, Units

Furthermore, BMI forecasts CVs to enjoy an annual average growth rate of 8% over the 2013-2016 period.

To be sure, the bulk of the domestic demand for CVs is coming from the post-flood rebuilding and not from infrastructure projects, which are fewer in Thailand compared to other countries in the region. Our infrastructure team is more bullish on the infrastructure market in Indonesia, Philippines and Malaysia ( see our online service, September 12, 'Tata's Expansion Into Indonesia A Logical Step' and October 11, 'Hino's Investment Taps Construction Boom'). We forecast annual average growth rates of 7.4%, 7.1% and 6.8% between 2012-2016 for Indonesia, Philippines and Malaysia's construction industries respectively.

However, BMI views Thailand as one of the most attractive production hubs in the South East Asian region due to its pro-business policies as well as excellent transport links to neighbouring countries and we believe that it is a canny move for truck makers such as Isuzu to use Thailand as an export base for other countries in the region.

We see the potential of Myanmar as an upcoming export destination for CV exports. Isuzu has been considering a distribution plan for Myanmar and is expected to reach a conclusion soon. With Myanmar recently passing an investment law bill, we can expect to see a surge in demand for trucks and pick-ups as companies look to increase their capital investment in the country. This would lead to a rise in demand for CVs, resulting in increased exports to the country.

We also expect to see more investments in the auto parts sector in Thailand. As automakers increase their investments and production in the country, component manufacturers will be incentivised to increase domestic production to take advantage of the agglomeration effects coming from being close to their customers.

This article is tagged to:
Sector: Autos
Geography: Thailand, Indonesia, Myanmar, Malaysia, Philippines

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