Impact of Thai floods on auto industry limited to short term, says Frost & Sullivan
A total of 26 of the 90 provinces in Thailand have been affected by floods, and automotive assembly plants and parts maker factories located mainly in and around Ayutthaya and Pathumthani provinces are suffering from it.
The Honda assembly plant is located in Ayutthaya and hence has been the most affected OEM with flood inundation within the assembly plant. All other OEM assembly locations are outside the flood-affected regions such as Chachoengsao (Toyota and Isuzu), Samut Prakarn (Nissan and Toyota), Chonburi (Mitsubishi), Rayong (Auto Alliance Thailand and GM).
Frost & Sullivan reports that Honda has stopped its production for the next week mainly because the plant is submerged with water, while Toyota has also stopped production for a week mainly due to supply chain disruption in Ayutthaya and Pathumthani province. Ford has resumed its passenger vehicle production from this week while its pick-up vehicle production has been halted as of now. GM is the least affected OEM mainly due to its plant location and its supplier base located outside the flood-affected regions.
Frost & Sullivan estimate the overall production volume loss of approximately 80,000-100,000 units for all OEMs in Thailand, if they lose the next 2-3 weeks of production. However, OEMs are likely to recover from this production loss by increasing working hours and running the plants at full capacity for the next two months.
The floods have had a severe effect on auto parts makers and as a consequence disturb the supply chain structure. The situation has had a cascading effect on automotive assembly and production in Thailand. Almost 10% of total auto parts for local production come from flood-affected regions. Toyota, Auto Alliance Thailand, Mitsubishi Motors, Nissan are all dependent on auto parts makers in the flood-affected region.
Some of the factors that are likely to be considered by OEMs in the future include increasing the stock-pile in terms of auto parts and revisiting the process of JIT (Just In Time), exploring a multi-sourcing strategy involving not only sourcing parts from different suppliers but from different regions, and climatic de-risking of the supply chain involving OEM investments at geographic locations least impacted due to natural disasters.
In conclusion, Frost & Sullivan said: ‘The automotive production in Thailand will be affected in the near term due to the lack of auto parts supply as a result of the floods but is not likely to have a medium-long term effect on Thailand as an automotive production hub in the region.’