October 7, 2015 1:00 pm JST
Emerging markets push

Japanese automakers rev up development drive in Thailand

KAZUYUKI OKUDAIRA, TAMAKI KYOZUKA and TAKAFUMI HOTTA, Nikkei staff writers

BANGKOK/MUMBAI -- Toyota Motor and other Japanese automakers are accelerating their drive to step up development activities in Thailand as they see the Southeast Asian country as key to the success of their strategies in emerging markets.     

     Thailand is Southeast Asia's largest auto-producing country and home to many Japanese and foreign plants. Japanese automakers also dominate the local market with a combined share of more than 80%.

     Japanese automakers are now seeking to make their Thai development centers more autonomous.

     Toyota Motor opened its Thai development center to the media for the first time on Oct. 5 and disclosed that the center now has as many as 1,400 engineers, while Mitsubishi Motors also set up its first overseas test track in Thailand recently.

     But Japanese automakers will still have to overcome some challenges, especially securing the necessary personnel locally, if they are to make Thailand a core part of their global strategies.

Toyota's development base

After establishing development centers in the U.S. and Europe, Toyota set up such a center in Thailand in 2003. The Thai development center merged with a local Toyota unit specializing in production support and procurement in 2007.

     The development center currently has 1,400 engineers, including those who are engaged in production support. Around half of the engineers are believed to be in charge of development. The number of engineers engaged in development has more than doubled in the past decade.

     On Oct. 5, Toyota opened the development center, located in the central Thai province of Samut Prakarn near Bangkok, to the media for the first time and held a briefing session there.

     The center was responsible for 40% of the design and evaluation of a new pickup truck produced under Toyota's IMV (Innovative International Multipurpose Vehicle) project targeting emerging markets.

     One Thai employee involved in the design of wire harnesses used in the new pickup said, "We were 100% responsible (for the wire harnesses), from designing them using a three-dimensional simulator to analyzing and evaluating them."

     The new IMV pickup hit the market in May and is to be exported to more than 100 countries and regions.

HV control software

In addition to vehicles targeting emerging markets, Toyota's development center in Samut Prakarn Province has begun to play a role in the development of vehicles to be sold around the world.     

     The Thai center developed some control software for hybrid vehicles. "They have been installed in 52% of HVs sold globally," said an official in charge of the software development.

     The Thai center also plays a central role in the testing of compressed natural gas vehicles and the evaluation of rod materials, which are used to make engine parts and other auto parts.

     Toyota started production in Thailand in 1964. Many Japanese partner suppliers have also set up operations in the Southeast Asian country. "In Thailand, it is easy for us to collaborate with parts makers. That's one of Thailand's strong points," said a Toyota executive.

     At the Oct. 5 briefing session, Soichiro Okudaira, Toyota's senior managing officer in charge of technology, also said that the Thai center "will proceed with the development of vehicles targeting the entire Southern Hemisphere, which includes South America and Africa, in addition to Asia."

Other Japanese automakers

Toyota's compatriot rivals are also stepping up their development activities in Thailand.

     Mitsubishi Motors, for example, set up a test course in the central Thai province of Chonburi in May at a cost of 500 million baht ($14 million).

     The test course, Mitsubishi's first outside Japan, is meant to test-drive vehicles to be sold not only in Thailand and other Southeast Asian countries but also in the rest of the world.

     Isuzu Motors, which became the first Japanese automaker to establish a development center in Thailand, is also moving to strengthen its development system there.

     Under the initiative of its Thai development center, Isuzu plans to develop a new truck body and start selling the new vehicle in Southeast Asia by March 2018.

     In emerging markets, Isuzu has so far sold trucks developed for the Japanese market after altering them slightly for the local market. Isuzu will cut costs by undertaking the planning, development and production of trucks locally.

Securing local personnel

Yoshinori Noritake, an executive vice president at a Toyota subsidiary in Thailand, said that he wants to see local engineers become chief engineers responsible for the development of IMV and other vehicles sometime in the future.

     Noritake himself previously served as a chief engineer at Toyota responsible for the development of strategic cars for emerging markets.

     But Toyota will face difficulties securing necessary personnel in Thailand as potential future chief engineers responsible for the development of auto bodies. "We need to foster personnel who can think and act for themselves. But it will take time to do so," said a Toyota executive in Thailand.

     An executive at a Japanese automaker also said, "There are not so many competent science and technology personnel in Thailand in the first place. Competition for such personnel with Western and Chinese makers is also becoming clear."

     Toyota opened its first overseas development center in North America in 1977. But it took over 30 years for the automaker to have its first local chief engineer responsible for the development of auto bodies.

     Toyota's annual auto sales around the world have topped 10 million vehicles. President Akio Toyoda said, "For the sake of sustained growth, we need to conduct a drastic review of the way we have done our jobs so far."

India and China

Meanwhile, India and other Asian countries are also seeking to attract research and development centers of foreign automakers as part of efforts to develop their domestic industries.

     The Indian government of Prime Minister Narendra Modi, who took office in May 2014, is pushing ahead with the "Skill India" initiative aimed at promoting the development of young people's vocational skills.

     The Modi government is also expected to step up efforts to attract foreign automakers' development centers.

     Apparently seeing the Modi government's policy as a tail wind, Maruti Suzuki India, Suzuki Motor's Indian subsidiary, is now set to put into full operation a large-scale development center with a test course in the northern Indian state of Haryana. Maruti Suzuki invested around 30 billion yen to build the center.

     Toyota will also develop a core system for HVs in China. The automaker is to release two new models fitted with the locally developed core system, including the Corolla hybrid car, by the end of this year.

Toyota Motor Corp.

Japan

Market(Ticker): TKS(7203)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 184,468.70M
Shares: 3,262.99M

Mitsubishi Motors Corp.

Japan

Market(Ticker): TKS(7211)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 10,608.25M
Shares: 1,490.28M

Isuzu Motors Ltd.

Japan

Market(Ticker): TKS(7202)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 10,810.06M
Shares: 848.42M
Asia300

Maruti Suzuki India Ltd.

India

Market(Ticker): BOM(532500)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 35,897.9M
Shares: 302.08M

Suzuki Motor Corp.

Japan

Market(Ticker): TKS(7269)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 24,574.55M
Shares: 491.01M

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