Fortune Parts Industry Plc (FPI), a MAI-listed auto parts manufacturer, plans to expand its production in Ecuador next year to tap the South American market and take advantage of Ecuador's tax incentives.
FPI makes and sources auto parts for the replacement market, 80% of which, it says, is not affected by shrinking car output.
Managing director Sompol Tanadumrongsak said the company signed a memorandum of understanding in April with an Ecuadorean automotive firm to form a joint venture in Ecuador worth around 60 million baht.
"FPI will spend about 30 million baht on new machines and make the best use of its 30 existing moulds to be shipped from Thailand, while local investors will invest in factory," he said.
FPI's investment also stems from the likelihood of a tariff rise in Ecuador, as its government plans to raise its auto parts import tax in 2015 from 20% to 40%.
Sompol: Auto parts demand strong
South America accounted for 16% of FPI's export revenue last year.
Mr Sompol said once its Ecuador factory is up and running, FPI would ship its output to Bolivia, Columbia and Peru, as Ecuador already has a free trade agreement with these nations.
He said the South American market demand for auto parts is very strong, mainly to support Chevrolet and Suzuki vehicles.
Exports now contribute as much as 85% of the company's revenue, with customers in 122 countries.
Mr Sompol expects its revenue to surge by 10% to 1.9 billion baht this year.
"FPI produces and sources auto parts to serve the replacement market, 80% of which is not affected by shrinking car output," he said.
Thailand's overall auto production was forecast to drop to 2.2 million units this year from 2.45 million last year.
FPI invested 300 million baht last year to expand its production capacity and construct its new office and R&D unit as well as warehouse, he said.
Construction of those facilities is expected to finish in the final quarter this year.
"FPI will utilise full production capacity next year from 75% now," said Mr Sompol. "The expansion is expected to raise revenue growth by 15% in 2015."
FPI is a plastic parts manufacturer. Last year it made 6.67 million pieces for auto parts, 57 million square decimetres for plating and 33.6 million sq dm for painting.
Mr Sompol, who is also a vice-president of the Thai Auto-Parts Manufacturers Association, expects the value of Thai auto parts exports to increase by 8-10% this year from $16.5 billion last
year.
Shares of FPI closed Thursday on the Market for Alternative Investment at 10.20 baht, up/down 30 satang, in trade worth 5.84 million baht.