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Thailand’s Position As Key Automotive Production Hub To Further Strengthen In Next Five Years, Says GlobalData

Thailand’s Position As Key Automotive Production Hub To Further Strengthen In Next Five Years, Says GlobalData

Automotive sector has long been a key pillar of the Thailand economy. Increasing domestic demand, attractive tax incentives by government and reduced import duties on auto parts are all set to boost investments in the sector and the country’s position as a key automotive production hub for leading automakers is set to strengthen over the next five years, according to GlobalData.

Major automakers including Toyota, Nissan, Mitsubishi, Honda, Isuzu, Ford and Mazda have chosen Thailand as their production hub. As of 2019, Thai vehicle production capacity was approximately 4.1 million units with Japanese OEMs Toyota, Mitsubishi, Honda and Nissan holding majority shares of 20.8 percent, 12.4 percent, 10.2 percent and nine percent, respectively, according to Federation of Thai Industries (FTI).

Nissan recently announced plans to ramp up vehicle production in Thailand in order to meet the strong overseas demand, especially for Nissan Kicks e-Power and Nissan Navara. The company plans to hire over 2,000 people in Thailand.

Animesh Kumar, Director of Automotive Consulting at GlobalData, says: “Thailand is presently Nissan’s only production base in the ASEAN region and a leading export hub for the company, exporting to over 100 countries. The plans to ramp up production and manpower are aligned with major business restructuring and new priorities set by the company in between 2019 and 2020.

“As a part of restructuring, the company also discontinued a few models and re-aligned capacity utilisation in Thailand. The company’s announcement to increase production in Thailand follows its shutting down of production in Indonesia and Spain. The move will further strengthen Thailand’s position as a strategic location and key production hub for Nissan globally.”

Thailand is also bolstering its image as one of the budding EV hubs in ASEAN. Attractive incentives through Thailand Board of Investment (BOI) investment support has made OEMs including Mitsubishi, BMW, FOMM, Nissan, Toyota, MG to ramp up EV production in the country.

Mr Kumar concludes: “The Big three in Southeast Asia markets–Thailand, Indonesia and Malaysia–have been competing against each other to attract investments. Governments and administrators in all three countries have extended attractive policies, packages and subsidies and over the years managed to attract several global players. However, at the moment, Thailand indeed has its nose ahead. Favourable policies and support from the government, strong automotive supply chain, export potential, EV opportunities, skilled workforce and strong domestic market are conducive for the further growth of Thailand as a key automotive production hub that caters to the domestic as well as global markets.”

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Thailand’s Electronics Sector Still A Magnet For Investors Amid Pandemic

Thailand’s Electronics Sector Still A Magnet For Investors Amid Pandemic

The COVID-19 pandemic and the US-China trade friction have failed to slow Thailand’s resilient electronics and electrical (E&E) industry which on the contrary many investors see as a haven, Thailand Board of Investment (BOI) data shows.

In the first nine months of 2020, the number of foreign and domestic companies which applied to invest in Thailand’s E&E sector actually rose to 106 projects, from 94 projects in the same period in 2019, making it by far the most popular sector, totaling over $1.2 billion in investment applications submitted to the BOI.

With a supply chain of some 2,500 companies and 800,000 employees ranging from researchers with doctoral degrees to vocationally trained technicians and experienced assembly line workers, it is the country’s largest manufacturing employer, according to Thailand’s Electrical and Electronics Institute (EEI).

“E&E is fundamental to Thailand 4.0”, said EEI president Narat Rujirat, referring to the innovation-driven growth strategy of Southeast Asia’s second largest economy.

This ambitious vision involves creating a regional hub for futuristic industries including medical devices, electric vehicles, robotics and automation. At its heart is the technological transformation of one of Thailand’s long-established core industries, electrical and electronics, into what is today termed “Smart E&E” and the emergence of the so-called Internet of Things (IOT).

Thailand’s E&E sector has burgeoned into a global powerhouse and is the world’s second largest exporter of computer hard disc drives, air conditioners and washing machines, according to GSB Research, a unit of Thailand’s largest state-owned bank.

In total, Thailand’s E&E industry generates $56.5 billion worth of exports in 2019, or 24 percent of total exports, according Thailand’s Ministry of Commerce and GSB Research.

In addition to a strong supply chain and skilled human resources, Thailand’s attraction for E&E investors also stems from its strategic geographical location at the crossroads of Asia, which has enabled it to become one of the world’s top exporters.

Investors also benefit from privileges offered by the BOI. E&E companies focused on innovation and research and development can receive tax breaks of up to 8 years and other incentives such as renewable smart visas of up to four years for international talent and investors in key sectors such as smart electronics, as well as their families. The BOI also supports companies by helping establish industrial linkage, sourcing of local suppliers and business matching. Many companies have developed strong partnerships with local academic institutions.

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Driving Industry Forward With Intelligent Technologies

Driving Industry Forward With Intelligent Technologies

INTERMACH and MTA Asia 2020—ASEAN’s leading international industrial machinery and subcontracting event—is proud to showcase intelligent industrial machinery and technologies that drive the industry forward with timely manufacturing solutions such as automation, robotics and artificial intelligence (AI). 

The event offers a platform that will provide countless opportunities for entrepreneurs to gain access to advanced technologies and knowledge in a variety of industries. 

This year, more than 50 items will be launched for the first time in Thailand and ASEAN. There will also be a full range of sheet metal fabrication technology from 150 of the world’s leading brands, as well as additive manufacturing technology.

The event to be held from September 23–26 at the Bangkok International Trade & Exhibition Centre (BITEC) in Thailand, will feature cutting-edge manufacturing technologies and intelligent technology showcases from over 1,200 brands and 45 countries, over an exhibition area of 38,000 sqm. It will include major pavilions from South Korea, China, Japan, Taiwan, and Singapore. It will also feature an interesting line-up of conferences and forums, such as the following:

  • INTERMACH Forum: “SMEs, Transformation to Smart Manufacturers”
  • Future Automotive Forum: “Disruption of the Future Automotive in Thailand”
  • System Integrator (SI) Forum
  • Thai Subcon Seminar

In particular, the 4th INTERMACH Forum is designed for entrepreneurs in small and medium enterprises (SMEs). The forum will feature leading speakers and experts from both private and public sectors, who will share overviews and their insights in options and challenges on technology and workforce transformation for smart manufacturing. There will also be over 50 SME Empowerment Seminars and activities for SMEs related to future automotive, medical device, robotics, aerospace, and other ground-breaking industries.

Apart from these, the event will feature the Industrial Automation and Robotic Show 2020 (iAR), ASEAN’s leading exhibition on automation and robotics technology. The show, part of INTERMACH, provides a platform for advance automation and robotic technology and solutions enablers who are looking to upgrade their manufacturing, gain first hand updates on industry trends and developments, and grow their businesses in the market.

Co-located Events

SUBCON Thailand 2020 is the 15th Edition of ASEAN’s leading industrial subcontracting and business matching event. This is the only event jointly organised by the BOI Unit for Industrial Linkage Development (BUILD) – Thailand Board of Investment (BOI), Informa Markets and the Thai Subcontracting Promotion Association.

The show is designed to present business opportunities to more than 4,000 industrial part makers and help exhibitors negotiate business with major industrial part-buyers and manufacturers from Tier 1 and Tier 2. This year’s show is projected to be attended by more than 25,000 buyers from industries such as automotive, electric, electronic, machinery, as well as future industries including aviation, medical equipment, robotics automation and digital are all expected to take part in the event.

SHEET METAL ASIA 2020 is the 20th edition of Thailand’s largest international sheet metal fabrication and machinery event. The show brings together comprehensive technologies such as fibre laser machinery, CO2 lasers, press brakes, punching machines, water jet technology, and more, from over 300 major brands from 25 countries. The advanced technologies in sheet metal fabrication will cover industries such as automotive, electronics, electric equipment, construction, interior and furniture, medical devices, and agriculture.

For more information or immediate pre-registration, visit www.intermachshow.com.

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Thailand BOI Encourages Focus On Automation And Human Resource Training Ahead Of 2021 Recovery

Thailand BOI Encourages Focus On Automation And Human Resource Training Ahead of 2021 Recovery

The Thailand Board of Investment (BOI) is urging investors to focus on enhancing productivity and efficiency through automation and human resource training by taking advantage of the key promotion measures offered to them, in order to prepare for the economic recovery expected in 2021.

“We are now focusing not only on attracting new investment projects but given the economic situation we also believe it necessary to make existing ones more productive, to have a higher level of productivity which is a critical issue for Thailand to move forward,” Ms Duangjai Asawachintachit, Secretary General of the BOI, told a Webinar titled “Support Measures for Economic Recovery” that was co-hosted by the Joint Foreign Chamber of Commerce in Thailand (JFCCT).

For 2020, Thailand’s Finance Ministry anticipates a 8.1 percent contraction of the GDP, with a progressive improvement from the third quarter which should lead to a rebound in 2021.

“Looking forward I think we can expect the economy to gradually pick up in the remaining half of this year,” said Pisit Puapan, Director of the Macroeconomic Policy Bureau of the Thai Finance Ministry.

“For 2021 the Ministry of Finance expects the Thai economy to rebound and show a positive growth rate of four to five percent,” Pisit said.

“I think the Covid 19 crisis has reiterated the necessity for us to move forward to more automation and robotics, so we are encouraging companies to invest in automation to become more efficient or have better products at lower costs,” Ms Duangjai said.

“So we are now offering tax incentives for companies that would like to invest in new machinery, to replace existing ones, for the purpose of energy conservation or to use lower energy or to reduce the impact on the environment.”

Another key area for promotion is in training and development of human resources, again with an emphasis on both new and existing projects.

Thailand has faced a surge in furlough as a result of the lockdowns in April-May in response to the Covid pandemic, and the threat of burgeoning unemployment in the coming months or years is real, although the worst of the economic impact was no doubt felt in the second quarter of 2020.

“We think that Thailand will find herself in a totally new environment. Deglobalisation has already taken place,” said Charl Kengchon, Executive Chairman of the Kasikorn Research Center.

“Pandemic and fear of pandemic after Covid is not going to help global trade because increasingly more and more government will come to the realisation that public health in fact is a kind of national security issue and they are going to implement safeguards on health care and there are going to be non-tariff barriers because of that,” he said.

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Ahead Of COVID-19: Automotive On Slow Recovery

Ahead Of COVID-19: Automotive On Slow Recovery

Countries around the world are bracing for a possible, looming “second wave” of infections. However, the damage to the automotive industry has already been done. 

As one of the hardest hit sectors, the world’s light vehicle market is forecasted to decline by 17 percent to 73 million units in 2020, due to its impact and its associated economic fallout, according to GlobalData. This is a bigger one-off shock than witnessed in the two years of the global financial crisis. In fact, the damage has been the most acute in the second quarter of this year, when strict lockdown measures were in place across the world.

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In Indonesia, car sales fell by 46 percent annually in the first half to just 260,933 units, according to Association of Indonesian Automotive Manufacturers (Gaikindo) data compiled by Astra, as reported by The Jakarta Post.

Sales for the first half of the year in Thailand were down by 37.3 percent to 328,604 units, according to MarkLines Data Center. In particular, vehicle sales in June declined by 32.6 percent year-on-year to 58,013 units, marking its 13th month of successive declines. Production during the first half of the year was down by 43.1 percent to 606,132 units, according to the Federation of Thai Industries (FTI). 

Here, we continue to bring you the latest coverage in ASEAN’s automotive industry amid COVID-19: 

THAILAND

  • Energy Absolute (EA) will be unable to deliver 5,000 electric vehicles (EV) to clients this year, causing it to revise its revenue outlook from THB20 billion set before the outbreak to THB15 billion, according to a report from Bangkok Post.
  • By brand sales in June (data by MarkLines Data Center):
    • Isuzu was up by 26.1 percent to 16,661 units. For January to June, Isuzu reports sales of 76,054 units, down by 15 percent YoY. 
    • Toyota was down by 53.8 percent to 13,345 units
    • Honda was down by 52.1 percent to 5,822 units.
    • Mitsubishi sales were down 45.7 percent to 4,002 units
    • Nissan sales were down by 35.5 percent to 3,523 units.
    • The FTI announced that new vehicle production in June was 71,704 units, down by 58.5 percent YoY, but around 28 percent higher than the previous month as most car makers have restarted operations at their manufacturing plants. For 2020, FTI expects total vehicle production to reach 1.4 million units in 2020.
    • Sales of eco-cars in Thailand witnessed over 40 percent drop in the first half of 2020 to 69,816 units, MarkLines citing an article from Prachachat Turakij.
    • Starting August, Mazda Motor Corp. will return operations to normal or to pre-production adjustment levels. Overtime hours and work on holidays will resume for all plants. The car maker plans to continue normal operations from September onwards.
    • According to Bangkok Post, Germany-based MAN Truck and Bus Thailand remains optimistic about its future business in Thailand. Despite the ongoing pandemic, MAN maintains plans to expand its market in Thailand as it still sees the country—located geographically in the center of ASEAN—as a market with potential for its business expansion.
    • Suzuki Motor Thailand has sold 11,089 automobile units in the first half of 2020, down by 9 percent YoY.
    • The Thailand Energy Business Department said the enforcement of Euro 5 emissions standards will be postponed from 2024 after lockdown measures halted upgrade plans at six refineries. The upgrade requires technical help from overseas experts who are unable to visit Thailand because of travel restrictions imposed during the pandemic. According to Bangkok Post, the government is considering delaying a plan to make E20 the fundamental petrol at all stations because of the crisis.
    • China-based tire maker Linglong International Tire (LLIT) aims to boost its production capacity in Thailand in 2020, according to MarkLines, citing a Prachachat Turakij report.
    • Vroom Thailand, importer and distributor of Indian and European motorcycle brands, plans to expand its business by setting up a local factory to produce them in the country by 2023, according to Bangkok Post. The company plans to make Thailand its HQ in the ASEAN region.
    • During the first five months of 2020, only 600,000 motorcycles were sold in Thailand, down by 18 percent from 740,000 year-on-year, Bangkok Post cited Vroom chief executive Hideki Yanagisawa as saying. However, he expects better market sentiment in the second half this year, with full-year sales at 1.4 to 1.5 million units.
    • Thailand’s natural rubber industry is likely to remain depressed this year despite a sharp rise in demand for protective rubber gloves driven by the COVID-19 pandemic. According to the Thai Rubber Association, the virus crisis has prompted many automotive factories, notably in the United States and Europe, to shut down or slow their production, resulting in lower rubber tyre demand, Bangkok Post reported.
    • Eastern Polymer Group (EPG), Thailand’s top plastic moulder by capacity, is considering a move into the lucrative healthcare plastics market after suffering sales drops in its automotive products and insulation materials in air conditioners because of the pandemic, according to Bangkok Post.

INDONESIA

  • PT Astra International has reported a drop in revenue and net profit in the first half of the year, largely because of the pandemic’s major impacts on the automotive industry and commodity prices, according to The Jakarta Post. Countermeasures against the pandemic implemented in most regions in Indonesia, including the temporary closedown of manufacturing activities and automotive distribution, have impacted the group’s operations substantially.
    • Astra’s car sales fell by 45 percent during the first half of the year to 139,500 units. In the second quarter alone, sales fell 92 percent against the previous quarter. Honda Astra’s motorcycle sales, meanwhile, fell 40 percent to 1.5 million units in the first half and 80 percent quarter-on-quarter.
  • The Trade Ministry expects a boost in the export of some Indonesian products to Australia, including automotive products, electronics, and communication tools, as the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is now in effect, according to The Jakarta Post.

VIETNAM

  • Vietnam Motorcycle Manufacturers Association (VAMM) has reported sales of 518,920 motorcycles in the second quarter, down by 30.8 percent. For the first half of 2020, sales surpassed 1.24 million motorcycles. Among the members—Honda, Piaggio, Suzuki, SYM, and Yamaha—Honda Vietnam now accounts for 80 percent of the motorcycle market share in the Vietnam market, according to a MarkLines report citing Autodaily.vn.
  • Vietnam’s motorcycle market has also entered a period of saturation, being unable to maintain the impressive sales growth rate as in previous years.
  • The Ministry of Industry and Trade (MoIT) will focus on removing difficulties in industrial sectors in the second half of this year, especially the processing and manufacturing industry, to expand production and business, according to Viet Nam News. It plans to work closely with foreign-invested firms such as Samsung and Toyota and search for local producers to make raw materials and components to replace imports. The ministry has suggested localities develop material production regions, industrial parks and economic zones to ensure they have raw materials for domestic production.

PHILIPPINES

  • The Philippines Association of Vehicle Importers and Distributors Inc. (AVID) said sales of imported vehicles in June nearly tripled to 3,697 units from just 1,239 units in May, according to Philippine Star. Despite the huge improvement month-on-month, vehicle importers still registered a 55 percent YoY drop in sales during the first half of 2020 amid the temporary closure of dealerships during the lockdown imposed by the government due to the COVID-19 pandemic. AVID said it remains watchful of factors that may continue to dampen automotive sales in the coming months. These include lower remittances, weaker demand, and the prospect of a second wave of COVID-19 pandemic.

MALAYSIA

  • Following the sales tax exemption announced by the government on 5 June to boost car sales amidst the ongoing COVID-19 pandemic, Perodua has wrapped up June 2020 with an estimated 21,250 cars sold—its highest monthly sales figure so far this year and nearly triple that of last month. Perodua managed to sell 8,601 cars in March before the Movement Control Order (MCO) came into effect on the 18th day, halting the carmaker’s nationwide operations for two months. Perodua officially restarted nationwide on 19 May, managing to sell 7,886 cars before month-end.

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ASEAN Automotive On The Road To Recovery

ASEAN Automotive On The Road To Recovery

Despite continued softness in the market, the automotive manufacturing market is steadily moving towards recovery. According to Globaldata, although the global light vehicle sales fell 33.8 percent in May compared to a year ago, it showed an improvement from April when sales fell a record low of 47.5 percent. Analysts believe markets will begin the long climb back and we will begin to get more signals on market demand for the rest of the year.

In fact, China will lead the global auto market recovery. With automotive production and supplies resuming and China lifting restrictions on the movement of people and goods since early April, vehicle sales have started to stabilise.

Here, we take a look at the latest developments in the ASEAN automotive market and its road to recovery:

Thailand:

With phase 4 of relaxations, Federation Of Thai Industries (FTI) expects gradual recovery of the automotive market as businesses restart operations.

However, May vehicle production production was down 69.1 percent in May YOY, totalling 56,035 units. They noted that 2020 vehicle sales could be 700,000 units if the outbreak stays under control, or 500,000 units if local infections continue into September. 

Furthermore, 50 percent decline is expected for the auto parts market, but the Auto Parts Industry Club expects gradual recovery of auto parts industry as Thailand enters Phase 4 relaxation

  • AAPICO Hitech (AH) expects losses in its Q2/2020 amid the continuing decline in the local automotive industry from the beginning of the year due to the pandemic, Marklines cited a Thun Hoon report. Among AH’s businesses is the manufacture of OEM automotive parts. The company, according to the report, plans to boost its production capability this year to serve new auto parts products.
  • Mazda has reported sales of 1,602 vehicles in May 2020, down by 60 percent YoY, but up by 58 percent from the previous month. In a statement, Mazda is seeing positive signs that the automotive market is gradually recovering, given increased sales in every segment.
  • Mazda has announced that it will resume two-shift operations at all its plants in Japan in July. Its plants in Thailand and Mexico will be operating on limited days. Mazda expects global production volume in July to increase by 50 percent from June, according to a MarkLines report citing Nikkan Jidosha Shimbun
  • Auto parts maker T. Krungthai Industries Public Ltd (TKT) has over THB500 million ($16.15 million) worth of backlog order in hand, waiting to be delivered to customers, according to MarkLines, citing a Thun Hoon report. TKT expects sales to recover in the second half of 2020.

Indonesia:

GAIKINDO, Indonesia’s automotive manufacturers association, reported Indonesia’s total vehicle sales in May 2020 were 3,551 units, down by 95.8 percent YoY due to the coronavirus. Meanwhile, the government is encouraging innovation through its Industry 4.0 program which includes the automotive industry and EV industry.

Although sales have experienced a downward trend since the beginning of the year, PT Suzuki Indomobil Sales (SIS) remains optimistic that it can increase its market share this year. From January to April 2020, Suzuki’s market share increased to 11.5 percent, compared to 9.3 percent in the same period last year. (GAIKINDO)

Vietnam:

According to the Vietnam Automobile Manufacturers’ Association (VAMA), automobile sales declined 30.6 percent YOY to 19,081 units in May.

Vietnam ratified a free trade agreement with the European Union that will cut or eliminate 99 percent of tariffs on goods traded between the Southeast Asian country and the bloc, and provide Vietnam with a much-needed post pandemic boost, according to Bangkok Post. Vietnam will have a transition period of up to 10 years for some imports, such as cars. With this, insiders predicted the domestic automobile market will prosper in the last six months of the year and domestic automakers have the opportunity to develop as well as compete with imported cars. (VNS)

  • Toyota Vietnam has announced sales of 4,311 units in May 2020, up by 48 percent from April. (Auto Daily)
  • VinFast Production and Trading LLC announced in April that the inauguration and start of production of its automobile manufacturing plant will take place in June 2019 instead of September 2019 as previously planned.

Malaysia

Malaysian Automotive Association (MAA) reported new car sales decreased 62.2 percent YoY in May. They expect sales volume for June 2020 to be higher than May as businesses resume after restrictions for economic activities are lifted and sales tax exemption announced by the government.

Furthermore, The Malaysia Automotive, Robotics and IoT Institute (MARii) estimates a 28 percent drop in new car sales in 2020 due to the Movement Control Order (MCO) brought about by COVID-19, and that a minimum 500,000-unit total industry volume is needed in 2020 for automotive businesses’ continued survival.

  • The Malaysian government has agreed to reduce the sales tax for new vehicles for six months until December to revitalise the market, according to a report from New Straits Times.
  • For the 1Q 2020, UMW Holdings Berhad registered a lower revenue as disruptions caused by the COVID-19 pandemic led to lower sales in the automotive and equipment businesses.
  • In May 2020, PROTON sold 5,676 vehicles, accounting for an estimated market share of 23.3 percent, but down by 46.5 percent compared to last year. Sales in May, however, was a 73 percent improvement over that of March. For January to May 2020, PROTON’s sales volume declined by 23.3 percent, while the overall industry dropped by 48.7 percent over the same period.
  • Perodua has sold 52,920 vehicles as of the first five months of 2020, giving it a 41 percent market share against an estimated year-to-date total industry volume of 129,401 units.

Philippines:

Operations of both assembly plants and dealerships have resumed with easing of restrictions. The Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Truck Manufacturers Association (TMA) reported a 84.6 percent decrease in May car sales YoY. According to Philippine Star, however, May’s production figure of 4,788 units was a vast improvement over the 133 units manufactured in the previous month. Furthermore, CAMPI expects total vehicle sales to drop 20 percent in 2020 due to the pandemic.

  • Auto parts makers have renewed their call to the government to support local parts manufacturing by implementing higher duties on vehicle imports and prevent small and medium parts makers from closing shop amid the COVID-19 pandemic, according to a Philippine Star report.
  • Comprehensive Automotive Resurgence Strategy (CARS) program
    • Government introduced Incentives to encourage investments in vehicle manufacturing, while manufacturers have to manufacture at least 200,000 units of enrolled vehicle model within six years
    • According to the Department of Trade and Industry (DTI), volume of vehicles required to be produced will remain unchanged even if automakers are unable to reach the target

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ASEAN Aerospace And MRO Industry In The Wake Of COVID-19

ASEAN Aerospace And MRO Industry In The Wake Of COVID-19

The COVID-19 pandemic has an unprecedented adverse impact on the aviation industry and, consequently, on the MRO business, without clear visibility on the timing of its recovery, according to Singapore-based SIA Engineering Co. Ltd. Border controls imposed by countries worldwide and the precipitous decline in travel demand has forced drastic cuts in flight capacities and grounding of aircraft.

In response to the worsening crisis, the International Air Transport Association (IATA) is projecting a more realistic U-shaped recovery for the air travel industry, with domestic travel coming back faster than the international market. 

Many expect that because of the impact of the pandemic, activity in the commercial aerospace market will take several years to return to the levels seen just a few months ago. Some players in the aerospace manufacturing industry, including Boeing and Rolls-Royce, have even announced workforce reduction and production cuts.

However, Boeing is seeing some green shoots. Some customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started, while some countries and U.S. states are starting cautiously to open their economies again.

  • Boeing, in fact, has resumed production of the 737 MAX at the company’s Renton, Washington factory.
  • On 14 April 2020, IATA released an updated analysis showing that the COVID-19 crisis will see global airline passenger revenues drop by US$314 billion in 2020, a 55 percent decline compared to 2019. Airlines in Asia Pacific will see the largest revenue drop of US$113 billion in 2020 compared to 2019 (-US$88 billion in 24 March estimate), and a 50 percent fall in passenger demand in 2020 compared to 2019 (-37 percent in 24 March estimate).

According to Oliver Wyman:

  • As of late April, over 65 percent of the pre-COVID fleet of 27,500 commercial aircraft have been parked
  • The current trajectory for fleet reductions and lower aircraft utilisation would reduce global MRO demand in 2020 by over $48 billion, or 53 percent

Here’s an update of what has been happening in ASEAN’s aerospace and MRO industry amid the ongoing COVID-19 pandemic.

Indonesia

  • Indonesia’s national airline, Garuda Indonesia, has resumed domestic flights starting May 7, 2020.
  • PT Garuda Maintenance Facilities (GMF) AeroAsia expects to see increasing demand for MRO services from non-affiliated international airlines and has projected an 80 percent y-o-y increase for MRO services, from 71 percent in 2019

Philippines

  • AirAsia is set to gradually resume services in the Philippines on June 5, 2020, following the Philippine government’s directive of easing community quarantine restrictions in Metro Manila and several parts of the country. The resumption of services will initially be for key domestic routes, and will gradually increase to include international destinations by July 1.
  • Air Carriers Association of the Philippines (ACAP), comprising: Philippine Airlines, Cebu Pacific and AirAsia Philippines, sees the industry shrinking in the next two years. The association has requested government assistance, including waiver of airport charges and credit guarantees
  • Infrastructure projects still ongoing: Lufthansa Technik and Metrojet Engineering

Thailand

  • Airbus withdraws from MRO joint venture with Thai Airways
  • Thai Airways has filed for bankruptcy protection to rehabilitate business (to restructure under the supervision of the local bankruptcy court). Will not resume its international flight operations until 30 June.
  • The proposed MRO project at the U-Tapao Airport will proceed as planned despite Thai Airways International (THAI) entering bankruptcy. The THB11 billion project has already been approved by the Cabinet and a contract is expected to be signed in June. (The Nation Thailand)

Singapore

85 percent of the Singapore industry is involved in maintaining and repairing aircraft. Singapore also plays a small but critical role in the global aerospace supply chain, with its SMEs having a key role in MRO and manufacturing—supporting special processes, tooling, testing, logistics, manpower, and other services. (Association of Aerospace Industries Singapore)

  • SIA has announced that it will resume flights to 27 destinations and increase no. flights for other services in June & July
  • Government has set aside S$750 million of support for the aviation sector and consolidation is expected to happen over the next 12 to 18 months.
  • Collins Aerospace, which just opened a 10,000 sq ft innovation hub in Singapore, is “monitoring the evolving market conditions very closely”. 
  • Rolls-Royce has scaled down its operations in its facility which tests Trent aero engines (Channel News Asia)
  • ST Engineering 
    • expects a slowdown in its aerospace unit due to deferred MRO services and lowered original equipment production rates 
    • however, the company has secured about $838 million across its spectrum of aviation manufacturing and MRO businesses
      • The MRO contracts included A320 heavy maintenance contracts and CFM56-7B engine maintenance contracts from Chinese airlines, and a component Maintenance-By-the-Hour (MBHTM) contract from a Southeast Asian airline to provide comprehensive component maintenance services for its entire fleet of Boeing 737 and Bombardier Q400. 
    • The Group is discussing with its customers to adjust delivery schedules or address order cancellations due to the evolving crisis. As at the end of 1Q, the Group’s order book remains robust.
  • BOC Aviation, a company involved in aircraft sales and leasing has extended its Engine MRO contract with Lufthansa Technik for another five years.
  • Through the enhanced Jobs Support Scheme (JSS), companies such as ST Engineering and SIA Engineering Company (SIAEC) will receive millions in additional wage support to cushion the devastating blow that COVID-19 has dealt the aerospace industry. (The Business Times)

Vietnam:

  • Suspended all international and most domestic flights in March and April in an effort to curb the spread of the coronavirus, domestic flights have resumed since April 22, after the government lifted a lockdown order, while international flights are expected to partially resume from June 1.
  • Will not consider applications for new airlines as it looks to prioritise the recovery of its aviation sector after the impact of the novel coronavirus, according to the Civil Aviation Authority of Vietnam (CAAV). (Bangkok Post)

 

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COVID-19 Updates: Auto Makers Revving Up Production To Drive Market Recovery

COVID-19 Updates: Auto Makers Revving Up Production To Drive Market Recovery

In the wake of the continuing impact of the COVID-19 pandemic, global light vehicle sales in 2020 are now forecast to drop to 69.6 million units, 22 percent lower than in 2019, with risks to the forecast still skewed to the downside, according to IHS Markit.

In Southeast Asia, sales of new vehicles in the region’s six largest markets combined are estimated to have declined by over 19 percent to 700,528 units in the first quarter of 2020, according to GlobalData. Thailand saw first quarter sales down 24 percent as its economy reeled under the impact of much-reduced travel and tourism. Malaysia Q1 vehicle sales were down by 26 percent and Vietnam saw a slump of almost 32 percent.

Although 2020 is seeing a setback for the automotive sector in ASEAN markets, long-term prospects for the region remain very strong. GlobalData’s analysis points to strong indicators for long-term demand as motorisation rates rise with high economic growth—especially in Indonesia with its increasingly transportation hungry population of 273 million. Its market of around one million new vehicles a year is forecast to double to two million vehicles a year by the end of this decade.

In addition to strong long-term market prospects, the automotive manufacturing industry in the region benefits from relatively low costs, favourable government policies for investment, as well as free trading regimes for vehicles and components, according to GlobalData.

Here’s a roundup of the latest activities being done by automakers, parts manufacturers, and government units in ASEAN to drive the industry’s market recovery after the COVID-19 pandemic.

Thailand

  • According to the Federation of Thai Industries (FTI) automotive club, Thailand’s automotive production is likely to plunge 37 percent to 1.33 million units this year and could drop even further to 50 percent (to one million units) if the pandemic lasts till June.
    • Proposed measures to boost demand includes: a car trade-in scheme, 50 percent excise tax reduction until the end of the year and a delay in enforcement of Euro 5 emission standards
  • According to MarkLines Data Center, April vehicle sales in Thailand declined by 65 percent YoY to 30,109 units
  • Japan’s Isuzu Motors Ltd forecasts that demand for pickup trucks and other light commercial vehicles in Thailand is likely to fall 35 percent this year
  • Nissan Thailand has resumed production in its first Thai plant as well as plant 2 (on 1st June)
  • Mercedez-Benz Thailand plans to postpone the launch of the EQC BEV in Thailand to 2021 amid the coronavirus crisis, according to MarketLines, quoting a report from (Thansettakij)
  • Summit Auto Body Industry Co. Ltd (SAB) will continue with its project despite the pandemic, investing THB810 million—mostly for its plant expansion and purchase of new machines. SAB initially targeted THB8.8 billion for its 2020 revenue; but because of COVID-19, it revised down its forecast by 50 percent. (Prachachat Turakij)
  • TAPMA (Thai Auto Parts Manufacturers Association) expects exports of Thailand’s auto parts to drop in the second quarter of 2020 (2Q 2020) following the temporary suspension of car manufacturing plants both in Thailand and overseas amid the COVID-19 pandemic. However, recovery is expected in Q3 as plants are reopening (Marklines).

Indonesia

  • Gaikindo, Indonesia’s automotive manufacturers association, have reported that Indonesia’s total vehicle sales in April 2020 were 7,871 units, down by 90.7 percent YoY due to the coronavirus, according to MarkLines. January-April sales were down by 28 percent to 244,762 units.
    • In terms of automaker sales in April, Toyota was down by 90.3percent YoY to 2,056 units (26.1 percent market share); Daihatsu was down 91.8 percent to 1,330 units (16.9 percent market share); Honda was down 89.8 percent to 1,183 units (15 percent market share); Suzuki was down 86.4 percent to 1,042 units (13.2 percent market share); and Mitsubishi was down by 89.7 percent to 808 units (10.3 percent market share).
  • The Indonesia Coordinating Ministry for Economic Affairs has announced incentives in the form of stimulus, amounting to IDR 70 trillion, for the automotive industry players to minimise the impact of COVID-19.
  • Toyota Motor Manufacturing Indonesia (TMMIN) is set to resume operations this month after it suspended manufacturing operations from May 1 to June 1, 2020.
  • PT Toyota Astra Motor also announced to restart production around the same time, according to VietnamPlus.
  • PT Astra International: Its automotive sales drop by 91.2 percent year-on-year (yoy) in April to 3,807 units, according to data from the Association of Indonesian Automotive Manufacturers (Gaikindo).
  • Suzuki Indonesia: Gradually resumed operating the plant starting on May 26, 2020. Before this, Suzuki Indonesia had temporarily suspended factory operations from April 13 to May 22, 2020.

Vietnam

  • According to a report from the Vietnam Automobile Manufacturers’ Association (VAMA), the automotive market suffered a decline of 36 percent over the first four months and only 11,761 units were registered in April 2020
    • Sales of passenger cars decreased by 40 percent, commercial vehicles by 26 percent and specialised vehicles by 16 percent, compared to the previous month.
  • On May 20, the government approved a plan to reduce auto registration fees by 50 percent until the end of the year which could help domestic enterprises recover and stimulate car consumption for domestically-made cars over imports

Malaysia

  • Malaysian Automotive Association: Malaysia recorded just 141 sales of new automobiles in April, down 99.7 percent compared to the same period in 2019 (49,939 units)
    • Estimates point to a plunge to 400,000 this year. Sales for the first four months of the year declined 45 percent to 106,600 autos.

Philippines

  • The Chamber of Automotive Manufacturers of the Philippines (CAMPI) expects vehicle sales to decline by at least 20 percent in 2020 amid the COVID-19 lockdown. Earlier, the Association of Vehicle Importers and Distributors Inc. (AVID) expects total vehicle sales to decline by 40 percent. Total automotive sales covering vehicles sold by both CAMPI and AVID reached more than 410,000 units last year.
    • Toyota Motor Corp. restarted production in the Philippines, Pakistan, and Russia, on May 22. Toyota’s vehicle plant in the Philippines, which produces models such as Vios, resumed operations on a single shift on May 18. The six overseas plants where Toyota has not resumed plant operations yet include Indonesia, Brazil, India, Venezuela, Portugal, and Czech Republic.

 

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FTI Spurs Thai Automotive Market With Proposed Measures

FTI Spurs Thai Automotive Market With Proposed Measures

According to the Federation of Thai Industries (FTI) automotive club, Thailand’s automotive production is likely to plunge 37 percent to 1.33 million units this year and could drop even further to 50 percent (to one million units) if the pandemic lasts till June.

FTI has proposed measures to boost domestic car demand, including a car trade-in scheme, 50 percent excise tax reduction until the end of the year and a delay in enforcement of Euro 5 emission standards.

Under the car trade-in scheme, the government encourages motorist to purchase new, eco-friendly vehicles and turn in cars over 20 years old. An estimate of two million cars would qualify for the scheme, according to a spokeman for FTI, in an interview with Bangkok Post. Although the government may not be able to fund the scheme entirely, subsidies will be provided for auto companies. This is a bid to boost volume for automakers and prevent job layoffs.

Furthermore, FTI is looking into alternative measures to help auto parts manufacturers tide through the pandemic. The group is studying the possibility of repurposing and shifting domestic auto parts manufacturing plants to produce medical devices or aviation parts which are in greater demand following the pandemic instead.

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LVD Discusses Challenges And Opportunities In Thailand

LVD Discusses Challenges And Opportunities In Thailand

Joshua Tan of LVD talks about the company’s Thailand market, the challenges and opportunities they are seeing in the region, and how they are helping customers move to Industry 4.0. Article by Stephen Las Marias.

LVD Discusses Challenges And Opportunities In Thailand

Joshua Tan

Established in 1952, LVD Group is a sheet metal machinery company, producing laser cutting, punching, and bending machines, as well as software. Founded by Jacques Lefebvre, Marc Vanneste and Robert Dewulf, the family owned company is now being managed by the second generation of the three founding families. Based in Gullegem, Belgium, the company has production facilities in Belgium, United States, France, Slovakia, and China, and is active in more than 46 countries around the world.

In Thailand, LVD has been present for around 35 years now. The company currently has about 12 employees covering sales and marketing, as well as service support for customers in the region.

At the recent METALEX 2019 trade exhibition in Bangkok, Thailand, Asia Pacific Metalworking Equipment News spoke with Joshua Tan, general manager of LVD (Malaysia) Sdn Bhd, about the company’s Thailand market, the challenges and opportunities they are seeing in the region, their latest innovations, and how they are helping customers move to Industry 4.0.

TELL US MORE ABOUT YOUR OPERATIONS IN THAILAND.

Joshua Tan (JT): We have sold around 1,100 machines now in Thailand, for which we continue to provide service and support. Right now, Thailand is a bit flat because of certain situations such as the US-China trade war, and then the government infrastructure projects have not been really benefitting the local fabricators or local companies. Our customers are not seeing a lot of projects that are needed for them to invest in more machines.

Nevertheless, Thailand remains a huge market, and a very competitive one. Apart from the European brands, we are now also competing with a lot of Chinese manufacturers who are coming in. Although some are touch-and-go, others are being represented by a lot of different agents.

So, in terms of the competitiveness of the market, I would say it is quite challenging in Thailand. But LVD has been present here for a long time, and we will are still seeing the market on a stable growth mode.

WHAT OPPORTUNITIES ARE YOU SEEING IN THE REGION?

JT: In terms of opportunities, the government is still putting investments in infrastructures: ports, airport expansions, highways, and others all over Thailand. With all these investments, we are seeing there’s a demand for machineries to support these kinds of projects. These are opportunities—but we hope this will not be only for a specific country or a specific contractor to benefit from; it should benefit the local players in Thailand.

Secondly, I would say automation. Even though automation in Thailand has already matured, especially in the automotive sector, it is still rather new when it comes to sheet metal machinery. There are still a lot of opportunities for us to get into the automation area—this is also in line with Industry 4.0, where customers actually want to upgrade themselves to this vision. But they don’t know where to start and what to do, so we need to actually go in and make some proposals, and offer them our solutions into Industry 4.0 machines and software. 

The third is probably in the telecommunications area. We are now moving from 4G to 5G. When it comes to telecommunications, you need towers and communications boxes—these have to be made by sheet metal machines. With this migration to 5G, I would say there’s an opportunity for the local players to get these kinds of projects, and this will help increase the production for this type of products in the market.

WHAT ABOUT CHALLENGES?

JT: We often encounter customers looking into their budget to invest. Most of the time, they probably do not understand fully what machines can do for them—they would rather look into how much they have and how much they can afford to buy.

In reality, at that kind of budget, they probably won’t get the production capacities that they really need—so they will end up spending more money than if they bought a more-expensive machine that can actually commit to the productivity or efficiency they require. So, this is more about the education of customers, how much information we can provide them, and of course, how much they are willing to invest. And it is understandable—many customers are buying cheaper machines so that they can charge lower for their parts, because it is also a competition between customers. Therefore, when it comes to initial capital investment in machines, it is a very critical decision, and critical cost calculation for them.

To continue reading this article about LVD ‘s journey and the outlook for 2020, head on over to our Ebook!

 

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