AFTA Archives

Ford spends another US$900 million in Thailand to upgrade two factories

At different periods, manufacturers have different strategies which require investments in different parts of the world. In the 1990s, Ford decided that it must ‘control its own destiny’ in the ASEAN region and was attracted by the ASEAN Free Trade Area (AFTA). This would be a single trading region and those who made their products in any country in the region could export to another ASEAN country with no import duties imposed. For a mass producer like Ford (and the company was the one that introduced mass production to the auto industry), this was ideal as it meant that a mega-factory could be set up in one country to supply to other countries. Great for cost efficiencies which would also mean more competitive prices in the markets.

So Ford invested US$500 million (RM2.107 billion) to establish a brand new factory in Rayong, on the Eastern Seaboard of Thailand. The factory, called Auto Alliance Thailand (AAT), was a joint-venture with Mazda, which was then an affiliate. Its main product would be the new Ford Ranger truck and Mazda equivalent, the BT-50, with the Everest SUV being added later. Besides supplying the Asian market, the factory also supplied to other global markets which was helpful during the regional downturn when the Asian Financial Crisis hit.

Auto Alliance Thailand, the factory set up in the mid-1990s as a joint-venture between Ford and Mazda. Its first product was the Ranger (below) which was exported around the ASEAN region as well as globally.

17 years after AAT began operations, Ford set up another factory in the same area with an investment of US$450 million (about RM1.9 billion) and it was wholly owned by the carmaker. Known as Ford Thailand Manufacturing (FTM), it was initially producing passenger car models like the Fiesta and Focus but when Ford decided to change strategies in the Asian region and focus on trucks, the factory switched to making only Rangers.

Ford built the second factory as demand for the Ranger grew. This was necessary as the 270,000-unit output from AAT was strictly fixed at 50:50 for each of the brands. This meant that Ford could get no more than 135,000 vehicles a year, even if Mazda did not use up its full allocation. Mazda too would have experienced the same frustration as the popularity of its models grew and one solution has been that its new BT-50 truck is now being produced at Isuzu’s factory (also in Thailand). In order to raise its output, Ford moved some production of the Ranger to FTM in 2016.

Next year will see the new generation of the Ranger entering the market and Ford expects demand to be even higher. Since its output from AAT remains capped, it is expanding FTM and is spending another US$900 million (about RM3.8 billion) on upgrading its manufacturing facilities and capabilities in Thailand, at both FTM and AAT. Over 44% of the investment is in the supply chain network to provide opportunities for local supply chain partners.

Ford Thailand Manufacturing, located 14 kms from AAT, began operations in 2012. It produced the Fiesta, Focus and EcoSport models but now only does the Ranger, and has been upgraded to produce the new Ranger (below) next year.

This is the largest-ever single investment in Ford’s 25-year history in Thailand and is recognition of the importance of the country as a global export production base for the company. “This is an important milestone to build on our quarter-century of commitment to producing vehicles in Thailand, enabling us to further modernize and upgrade our local operations, and support production for the exciting upcoming launch of the next-gen Ranger, one of Ford’s highest volume and most successful vehicles anywhere in the world, and the next-gen Everest SUV,” said Yukontorn ‘Vickie’ Wisadkosin, President, Ford ASEAN and Asia Pacific Distributors Markets.

Besides adding a second shift at FTM which provides over 1,200 new jobs, the overall investment also brings Ford’s manufacturing facilities in Thailand in line with the latest global efficiency, flexibility, and quality processes through extensive upgrades and new state-of-the-art manufacturing technologies.

The company is almost doubling the number of robots at both FTM and AAT, with the addition of 356 robots at the body shop and paint shop. This brings the level of automation at the body shop at FTM and AAT from 34% to 80% and 69%, respectively.

Ford also has increased its production capability for multi-variant truck production in FTM. By increasing model flexibility, the plant can produce multiple cab styles – single cab, open cab and double cab – on the same production line. This allows more flexibility in planning and scheduling so the plant can react more quickly to customer demand and reduce customer waiting time for a new vehicle.

As part of the investment, Ford is the first auto manufacturer to implement ScanBox technology in Southeast Asia. This latest surface scan capability improves the time used to accurately measure the whole vehicle by 5 times during the assembly process, helping Ford to increase efficiency in problem solving for better quality control.

In addition, FTM and AAT are making significant efforts to support environmentally friendly initiatives, including using renewable energy, reducing CO₂emissions, and practicing zero waste to landfill.

Exporting vehicles is a significant part of Ford’s manufacturing business in Thailand, with the Ranger going to over 180 markets around the world. AAT will be the lead production hub for the upcoming next-gen Everest SUV which would almost certainly be based on the new Ranger.

Global debut of 4th generation Ford Ranger

Porsche confirms assembly plans in Malaysia, to start next year

As reported earlier, Porsche will be setting up assembly operations in Malaysia, the first time the sportscar maker has produced its cars outside Germany. The company has confirmed that small-scale local assembly operation in Malaysia will join the company’s two other production sites – the original one at Zuffenhausen and the 19-year old one in Leipzig.

It is believed that the plan to assemble in Malaysia has been under consideration for at least 5 years though it was only early this year that it became known outside the company. There is interest in the Southeast Asian region which is unified under the ASEAN Free Trade Area (AFTA) and member nations have agreed to allow intra-ASEAN exchange of goods and service without import duties. The agreement was signed in the early 1990s and was implemented in the early 2000s.

Carmakers have welcomed the AFTA agreement which allows them to set up a large factory with big volumes in one country to make vehicles for the region. This allows good economies of scale compared to the situation before where each country had low-volume assembly plants to cater only for the domestic market. The regional approach lowers production costs which benefits consumers who get lower prices or better features with the money saved.

Porsche would have likewise seen a similar opportunity, especially since Volkswagen began assembly in Malaysia. However, the initial plan is to assemble in Malaysia from 2022 for the local market only but it’s almost certain that there will be exports later on. This will enable pricing of some models to be more attractive and competitive as they will not be subject to the high import duties that the countries impose for vehicles originating from outside ASEAN.

Sime Darby to be local partner
Not surprisingly, Porsche will have Sime Darby Berhad as its partner in local assembly. Sime Darby Auto Performance, a subsidiary of Sime Darby, also handles the Porsche brand in Malaysia and another subsidiary, Inokom, has an assembly plant in Kedah. Some of the brands assembled at the plant, which began operations in the 1990s, are BMW, MINI, Mazda and Hyundai. BMW engine assembly is also carried out by a subsidiary adjacent to the plant.

*Mazda is among the brands that has assembly operations at the Inokom plant.*

*BMW also has engine assembly operations at a facility adjacent to the plant where some of its models are assembled.*

First Porsche production facility outside Germany
The local assembly operation will not only be something special for Malaysia but also for Porsche as it has never before had to have a CKD (completely knocked-down) process which is required for assembly overseas. It is not just a matter of picking a model and putting it into a box in disassembled form for assembly in another country. The model has also to be engineered for local assembly, taking into account the level of automation at the facility and capabilities of the workforce.

It is possible that the ‘SKD’ (semi knocked down) approach will be taken initially although this approach was stopped by the government in mid-2019. With SKD, bodyshells can be imported already welded together and in some cases, even painted. One thing that will prevent Porsche from exporting from Malaysia initially will be the requirement of 40% ASEAN content in each vehicle in order to qualify for the duty-free privilege. This usually takes while as suppliers have to be found or if they are new, then they will need time to also establish their operations.

Porsche Centre Ara Damansara 2020 — Porsche will have Sime Darby as its partner in the local assembly operations and the two companies are already familiar with each other as Sime Darby Auto Performance, a subsidiary, handles the German sportscar brand in Malaysia.

Willing to learn and adapt
“We’re fortunate that, due to careful planning, our existing factories are more than up to the task of meeting current and future global demand for our cars,” said Albrecht Reimold, Member of the Executive Board for Production and Logistics at Porsche. “However, the new assembly site in Malaysia meets specific market needs and, although a standalone project and modest in size and capacity, it signals our willingness to learn and adapt to specific local market conditions.”

“Malaysia and the whole ASEAN is a region of great potential, and we look forward to the first locally assembled models reaching our Malaysian customers next year,” added Detlev von Platen, Member of the Executive Board for Sales and Marketing at Porsche. “As Porsche is moving into a new era of mobility, Malaysia and the ASEAN region are gaining an increasing importance. This step now is part of a long-standing initiative to keep pace with rapidly evolving customer and market demands.”

Shell and Porsche team up to provide first cross-border high-performance charging network in Southeast Asia

Groupe PSA starts Peugeot vehicle exports from Naza Automotive Manufacturing, its production hub for ASEAN

The ASEAN Free Trade Area (AFTA) was conceptualised in the early 1990s and all the member nations signed an agreement to establish it in 1992. It was intended to create a regional trade bloc where goods and services could be exchanged between ASEAN countries with preferential tariffs .

The AFTA agreement’s main feature was the Common Effective Preferential Tariff (CEPT) which required all ASEAN members agree to adopt the same tariff structure and impose import duties of between 0 and 5% on goods and services which originate from any ASEAN country. A condition is that at least 40% of the content of the goods should be of ASEAN origin, besides being made in one of the ASEAN countries. This applies to finished goods, like complete vehicles, as well as components.

The benefit of AFTA to carmakers
Why have AFTA? The simple answer would be strength in unity and size. Having AFTA also means that instead of separate small markets, there will be a single larger one which can be treated as a single common market and estimates in the 1990s already placed the number of consumers at over 550 million – larger than the European Union then. Many ASEAN consumers were already in the middle class or moving into it (although the financial crisis of the late 1990s slowed things down a bit) and this increasing prosperity has certainly very attractive to companies doing business globally.

When AFTA was conceptualised in the 1990s, it was estimated that the single market would have over 550 million consumers. Today, the potential customer base is estimated at 680 million, an attractive number for carmakers.

For carmakers, AFTA was an attractive idea and during the 1990s, a number of global players began to establish big factories in Thailand and Indonesia. These would become regional hubs for certain popular models and as there would be no import duty imposed exporting vehicles between ASEAN countries, it was as good as making them in each country. The major advantage was that concentrating production in a single factory meant bigger volumes which would provide the vital economies of scale to push production costs down and have more attractive pricing.

Groupe PSA, the French automobile conglomerate with brands like Peugeot and Citroen in its group, also looked at AFTA but didn’t see the right numbers in the 1990s, and it was also focused on China which was then a fast-growing market. However, they kept an eye on the market growth in ASEAN and in Malaysia, where their partner is Naza Corporation, Peugeot sales were growing rapidly and accounted for 86% of the volume sold in ASEAN.

*Assembly operations at NAM, now majority owned and managed by Groupe PSA. (File image)*

Malaysia’S Naza Automotive Manufacturing plant becomes a regional hub
The Malaysian company also had its own assembly plant in Kedah and with Naza having proven its commitment, Groupe PSA made the decision to use Malaysia as its regional hub. The decision was announced at the Peugeot World Conference in January 2010. However, planning took some time but, in the meantime, Groupe PSA began small volume production of a Peugeot model at Naza Automotive Manufacturing (NAM) as a shared operation.

Early last year, the French company acquired a majority stake in the business operations of NAM which began operations in 2004. Groupe PSA and Naza will jointly produce Groupe PSA-branded cars for Malaysia and other ASEAN markets which now has a potential customer base of 680 million. Further opportunities will also be explored beyond ASEAN, with a potential to contribute significantly to Malaysia’s economy.

*Peugeot 3008 and 5008 models assembled in Malaysia will be exported to the Philippines.*

First exports to the Philippines
This month, NAM will begin exporting its first shipment, a batch Peugeot 3008s, to the Philippines. “The Peugeot 3008 with the Peugeot 5008 1.6 THP are targeted to be available in the Philippines with more than 4,000 units by 2023. The Philippines is the first ASEAN country where our cars manufactured at NAM is being exported to under the AFTA,” said Laurence Noel, Head of ASEAN & CEO of Naza Automotive Manufacturing, Groupe PSA. “More cars will be exported to other ASEAN countries very soon,” she added.

Find out more about the Peugeot 3008 and 5008 at www.peugeot.com.my.

Piston.my

AFTA

Ford spends another US$900 million in Thailand to upgrade two factories

Porsche confirms assembly plans in Malaysia, to start next year

Groupe PSA starts Peugeot vehicle exports from Naza Automotive Manufacturing, its production hub for ASEAN

Ford spends another US$900 million in Thailand to upgrade two factories

Porsche confirms assembly plans in Malaysia, to start next year

Groupe PSA starts Peugeot vehicle exports from Naza Automotive Manufacturing, its production hub for ASEAN

Archive

Hit the Road Safely this Hari Raya with Goodyear’s Exclusive Promotion

Speed Meets Style: Porsche and Puma’s New Basketball Shoes

Continental Tyres Launches High Performance Sporty Tyre Tailored for Asia Pacific Drivers

The New Peugeot 5008 – EV, Hybrid and Petrol Variants, 21-Inch Display!

All-Electric Mini Aceman Undergoes Rigorous Testing

Follow us on Facebook

Follow us on YouTube

The Piston Show