Toyota reels from strong baht but still banks on local plants

Toyota reels from strong baht but still banks on local plants

Mr Sugata (third left) is concerned about the baht's appreciation harming Toyota's profitability and car exports.
Mr Sugata (third left) is concerned about the baht's appreciation harming Toyota's profitability and car exports.

Toyota Motor Thailand is feeling the pinch of baht appreciation and has a negative outlook on car and auto part exports in 2020.

Toyota insists it will not relocate production to other countries, as its manufacturing facilities in Thailand have developed the area into a hub of local sales and exports.

President Michinobu Sugata said the baht has been strong since early 2018, hampering Toyota's shipments in value terms because the car maker uses US dollars as the core currency of exchange.

"Toyota has tried to increase its production efficiency at three plants in Thailand, as well as reduce its operating costs, but those actions could not offset the lower margins caused by the strong baht," Mr Sugata said. "The capability and competitiveness of Toyota in Thailand has declined compared to other operations overseas."

He said 2020 will be a challenging year for Toyota in its effort to maintain Thailand as an important production hub.

Toyota yesterday held its annual press conference to report last year's sales and exports and projections for 2020.

Exports totalled 264,775 units in 2019, a sharp drop of 10% from the previous year. Exports have dipped five years in a row.

The fall in export volume caused Toyota to drop from first place to second among car exporters, surpassed by Mitsubishi.

"This was a result of the difficult economic situation in Oceania, Central and South America," Mr Sugata said.

In 2020, Toyota targets exporting 263,000 units, a slight decrease from 2019.

"Toyota has a negative outlook on the continued US-China trade war that is affecting the overall global economy, although there was some good news when both countries signed a first-stage agreement," Mr Sugata said.

For local sales, Toyota posted 332,380 units in 2019, a 5.5% rise from the year before. The brand took a 33% market share in 2019, improving 2.8 percentage points from 2018.

But the country's car market stood at 1,008,000 cars, a decline of 3.3% compared with the previous year.

Mr Sugata said Toyota was able to overcome the market's negative growth.

For the 2020 automotive industry outlook, Mr Sugata said there are many difficulties for the local market and Toyota is facing headwinds, including decreasing consumer confidence and private consumption, a tightening of car loans and continued global economic uncertainty.

"Given these unfavourable factors, Toyota projects the total market will be 940,000 cars in 2020, representing a decrease of 6.7%," he said. "Amid this declining projection, Toyota aims to sell 310,000 units in 2020, a 6.7% decrease, and maintain a 33% market share."

In 2019, Toyota produced 570,850 units at three plants in Samut Prakan and Chachoengsao, representing a drop of 3%.

In 2020, Toyota plans to produce 556,000 units, a 3% drop in alignment with local and global demand.

In related news, Toyota was granted government incentives on Jan 7 for two projects to assemble plug-in hybrid and battery electric vehicles.

Executive vice-president Surapoom Udomwong said the next step will be to work with the Board of Investment for 5-7 months, then Toyota will receive an investment certificate to carry out these two projects.

"Toyota has three years to implement these plans at the Gateway plant in Chachoengsao, so its plug-in hybrid and battery EVs will be launched by 2023," he said. "The investment value of the two new projects will be much less than the current plan for hybrid EVs worth 19 billion baht."

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