BANGKOK: Thailand is expected to produce a record high 2 million vehicles this year, driven by a recovery in both domestic and external demand after supply disruptions in 2011 caused by serious flooding, the Federation of Thai Industries (FTI) said.
That total would be 37 percent higher than in 2011, when production plunged 11.4 percent to 1.46 million vehicles, Surapong Paisitpattanapong, a spokesman for the FTI's automotive group, told Reuters on Tuesday.
"We are very confident that production will reach 2 million this year. There's a lot of orders left to be delivered from last year in both domestic and export markets," Surapong said.
The best previous year was 2010, when demand for environmentally friendly "eco cars", led by the launch of the Nissan March, pushed output up to 1.65 million vehicles.
In 2011 the auto industry and global supply chains were only just recovering from Japan's earthquake and tsunami in March when flooding in Thailand hit them again in October.
The operations of Toyota Motor Corp, Mitsubishi Motors Corp, Mazda Motor Corp and Honda Motor Co Ltd all suffered, their operations halted for a month or longer.
Honda had the only assembly plant to be inundated. That has not been able to produce since early October.
HOPES FOR REBOUND
"We have high hopes that flooding this year, if there is any, will not affect the industry as badly as last year. The government's measures to mitigate the impact should work," Surapong said.
Thailand is racing to implement water management schemes costing 300 billion baht ($9.4 billion) to prevent a repeat of last year's disaster.
To support the recovery, the government has waived until June tariffs on parts and machinery imported by car makers to replace goods and equipment damaged by flooding.
Surapong, who expects 3 million vehicles to be produced in Thailand within five or six years, said other incentives, such as tax rebates for first-time car buyers, would also help the sector.
Parts makers including Somboon Advanced Technology Pcl (SAT) and Aapico Hitech Pcl are also expected to recover steadily, helped by pent-up demand.
"Companies like SAT should see the most outstanding profit among the auto sector this year. A major client like Mitsubishi Motors, for instance, has reaffirmed plans to go ahead with investment in an 'eco car' plant in Thailand," an analyst with Ayudhya Securities said.
SAT shares have risen more than 14 percent so far this year after losing 28 percent in 2011, when the automotive index fell 18 percent.
According to seven analysts polled by Thomson Reuters I/B/E/S, the company is expected to report a 31 percent drop in 2011 net profit to 533 million baht before seeing a 50 percent rise to 798 million baht this year.
The company is trading at 10.2 times forward earnings, compared with 16.2 times Indonesia's PT Astra International Tbk and 8.3 for Aapico Hitech.