EXECUTIVE CEO Q&A
Thai Rung Union Car Plc (TRU) was established in 1967 by Vichien Phaoenchoke and listed on the Stock Exchange of Thailand in 1994. Thai-owned and managed, the company is a leading automotive industry operator that offers fully integrated services starting from design through production and assembling. Sompong Phaoenchoke, the director and managing director, discusses the company's strategy and outlook.What is TRU's business model?
Thai Rung Union Car has always focused on product design and development through the production of dies and jigs and the manufacturing of metal and plastic automotive parts, seats and modification of multi- and special-purpose vehicles. In recent years, we've adapted our strategy to focus more on OEM parts making, contract assembly and painting, which combined account for 80% of our total business. However, we are looking to use our capabilities because of our uniqueness, integrated systems and R&D in vehicle modification to expand our special-purpose vehicle business further.
TRU is poised to grow when the AEC emerges in 2015, says Mr Sompong.
Who are TRU's customers?
Our major customers are leading US and Japanese automotive manufacturers, divided into: carmakers such as GM, Nissan, Isuzu, Toyota, Tata and Suzuki; industrial machinery makers such as Komatsu, Kobelco, Yanmar and Caterpillar; motorcycle makers including Triumph and Kawasaki; and others such as Emerson.
To be more specific about some of the work we do, for Tata pickup trucks we designed and assemble the flat-deck box, while for Chevrolet we are a major parts supplier for stamping. Since this year's second quarter, we have been doing painting and welding for Nissan's Navara pickup truck, and we do similar work for other automobile manufacturers in Thailand as well as for international markets. Thus we have a wide capability to service our customers and provide the necessary support to maintain the relationships we have built over the years.
TRU has begun to develop a special-purpose vehicle for military use. Can you provide more information?
The vehicles we have focused on developing for the past few years have already been used by the Thai Army, police and Forestry Department, and we're actively looking to begin exporting them to countries such as Sri Lanka, Pakistan, Myanmar and elsewhere in Asean among others. The target countries are essentially looking for a more cost-effective version of a Land Rover or Hummer. With our R&D and manufacturing capabilities, if a target country has a predominant supply of Toyota, Nissan, Mitsubishi or Ford pickups, then we can use the chassis and engine of that specific brand, apply our body kit and sell it in Thailand or export it. So we can become a real mass-volume body maker, a real special-purpose vehicle manufacturer, and we expect we can grow this segment strongly in the future.
What impact have government policies had on the automotive industry for Thailand?
The first-time car buyer tax incentive stimulated sales in Thailand very well this year and the government launched it at a time when the world economy was weak, thus improving domestic demand. It looks like 1.2 million cars will be sold domestically this year, and when combined with an expected 1 million to be exported, Thailand's automotive industry is extremely well balanced.
TRU has gone through a difficult period only to begin performing strongly again this year. Why is this?
TRU was a pioneer with our own branded cars, but with the developments in the industry and tax structure changes in Thailand, international brands grew very quickly, and our own branded cars dropped from 60% of revenue to 10%. Thus, we had four difficult years and adjusted our business strategy, expanding our OEM business with new customers, which improved our profitability as seen this year.
What are the biggest risks facing your business today?
One is the potential labour shortage, which can be offset by further investment in machinery to a certain degree. Also, this industry is constantly focused on cost reduction, and thus we have to ensure we can compete with newcomers, because if we don't respond fast enough as an industry, then the foreign firms that invest here may start to move elsewhere.
What impact do you think the Asean Economic Community will have on your business?
We have already seen how Afta has been beneficial by allowing Thailand to export to the Philippines, Malaysia and Indonesia with zero duties, and I can see the AEC opening further markets for Thailand, although there may be resistance from member countries that will want to protect their local industries. In terms of competition, given Thailand's infrastructure and automotive ecosystem, I am confident in the country's future for the next 5-10 years, but we'll have to follow closely the developments of our neighbours as well.
Our own company is preparing in terms of personnel, factory expansion and new machinery to maximise production efficiency and reduce costs as well as create a more efficient management system. In addition, we have conducted R&D into new, innovative products _ for example, the MUV4 Transformer car, which is similar to a Land Rover or Hummer but at a more reasonable price.
Apart from that, the company is building strategic business alliances inside and outside the country by seeking partners, so it's ready to grow in the coming AEC market from 2015.
Where do you see TRU in five years?
TRU wants to be both a first-tier OEM supplier and a vehicle brand owner, as we have the capability to do so. With the OEM business, we can grow with the industry and make the necessary investments to meet customer demand for the next five years. We plan to expand our special-purpose vehicles. I really would like for Thailand to have a brand within the automotive sector, be it a car, a part or a niche vehicle. Thailand has to be able to have more value-added products to maintain its competitive edge in the global market.
The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region, with more than 400 listed clients. This interview was conducted by Pon Van Compernolle, the editor of www.thaicapitalist.com. For more information, email email@example.com or firstname.lastname@example.org or visit www.thailistedcompany.com
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