GM struggling in ASEAN as Thai unrest knocked sales
US car maker General Motors (GM) said it was “struggling” in Southeast Asia as the recent political upheaval in Thailand knocked sales, compounding stiff competition from Japanese rivals and local currency weakness that has hurt the profitability of vehicles due to imported parts.
The admission is a sign that fluctuations in emerging market currencies are causing the largest US carmaker by sales to rethink its strategy in a region seen by car makers as one of the world’s most promising and increasingly benefiting from a rising middle class.
“We are struggling in ASEAN for many reasons – mainly due to the political impact in Thailand,” said Stefan Jacoby, head of GM’s consolidated international operations, a unit that includes all of the car maker’s businesses outside North America except China and Latin America.
ASEAN is the 10-member bloc known as the Association of Southeast Asian Nations, of which Thailand is the second-biggest economy after Indonesia.In Thailand, where GM claims a 4.3 per cent market share, Japanese car makers Toyota and Honda have for decades been dominant, and they have built extensive supplier networks across ASEAN.
While Toyota and Nissan have also suffered falling sales as a result of the political turmoil in Thailand, GM’s reliance on imported parts for some of its vehicles sold in the country has been exposed by the declining Thai currency, Jacoby said.
He estimated that annual vehicle sales in Thailand were now under 850,000 units, well down from 1.45 million in 2013.
The Detroit-based car maker plans to increase the proportion of vehicles made locally to reduce its exposure to the Thai baht – a move Jacoby indicated had wider implications for the company’s regional operations.
“With relative weakness in emerging market currencies you need to be independent from those currency fluctuations and that means you have to create deep local content not only with ‘tier one’ but also ‘tier two’ suppliers,” he said at the official opening of a new regional office in Singapore on August 5.
He declined to say how much of GM’s vehicles in Thailand were made using locally produced parts, but admitted that the company was “less localised” than its main competitors, according to the Financial Times.
He said the car maker had no plans to withdraw from production at its plant in Rayong province, in which GM has invested $1.5 billion and opened in 2000.
However, the former chief executive of Volvo said GM still needed “the right scale of products” and had “a lot of homework to do when it comes to our dealer network and our brand”.
GM recently redoubled efforts to penetrate ASEAN, where it has yet to turn a profit on a regional basis since establishing a southeast Asian unit in 1993. That has included spending $150 million on refurbishing an assembly plant outside Jakarta that it closed in 2006.
GM’s new Singapore office marks a return to the Asian city-state, which hosted the company’s Asian headquarters until 2004 when the car maker moved to Shanghai. However, GM last year said it would return to Singapore, where its consolidated international operations unit oversees markets in ASEAN, Africa, India, South Korea and the Middle East, as well as the European operations of Chevrolet – its best-selling brand – and Cadillac, its luxury marque.
US car maker General Motors (GM) said it was “struggling” in Southeast Asia as the recent political upheaval in Thailand knocked sales, compounding stiff competition from Japanese rivals and local currency weakness that has hurt the profitability of vehicles due to imported parts. The admission is a sign that fluctuations in emerging market currencies are causing the largest US carmaker by sales to rethink its strategy in a region seen by car makers as one of the world’s most promising and increasingly benefiting from a rising middle class. “We are struggling in ASEAN for many reasons – mainly due to...
US car maker General Motors (GM) said it was “struggling” in Southeast Asia as the recent political upheaval in Thailand knocked sales, compounding stiff competition from Japanese rivals and local currency weakness that has hurt the profitability of vehicles due to imported parts.
The admission is a sign that fluctuations in emerging market currencies are causing the largest US carmaker by sales to rethink its strategy in a region seen by car makers as one of the world’s most promising and increasingly benefiting from a rising middle class.
“We are struggling in ASEAN for many reasons – mainly due to the political impact in Thailand,” said Stefan Jacoby, head of GM’s consolidated international operations, a unit that includes all of the car maker’s businesses outside North America except China and Latin America.
ASEAN is the 10-member bloc known as the Association of Southeast Asian Nations, of which Thailand is the second-biggest economy after Indonesia.In Thailand, where GM claims a 4.3 per cent market share, Japanese car makers Toyota and Honda have for decades been dominant, and they have built extensive supplier networks across ASEAN.
While Toyota and Nissan have also suffered falling sales as a result of the political turmoil in Thailand, GM’s reliance on imported parts for some of its vehicles sold in the country has been exposed by the declining Thai currency, Jacoby said.
He estimated that annual vehicle sales in Thailand were now under 850,000 units, well down from 1.45 million in 2013.
The Detroit-based car maker plans to increase the proportion of vehicles made locally to reduce its exposure to the Thai baht – a move Jacoby indicated had wider implications for the company’s regional operations.
“With relative weakness in emerging market currencies you need to be independent from those currency fluctuations and that means you have to create deep local content not only with ‘tier one’ but also ‘tier two’ suppliers,” he said at the official opening of a new regional office in Singapore on August 5.
He declined to say how much of GM’s vehicles in Thailand were made using locally produced parts, but admitted that the company was “less localised” than its main competitors, according to the Financial Times.
He said the car maker had no plans to withdraw from production at its plant in Rayong province, in which GM has invested $1.5 billion and opened in 2000.
However, the former chief executive of Volvo said GM still needed “the right scale of products” and had “a lot of homework to do when it comes to our dealer network and our brand”.
GM recently redoubled efforts to penetrate ASEAN, where it has yet to turn a profit on a regional basis since establishing a southeast Asian unit in 1993. That has included spending $150 million on refurbishing an assembly plant outside Jakarta that it closed in 2006.
GM’s new Singapore office marks a return to the Asian city-state, which hosted the company’s Asian headquarters until 2004 when the car maker moved to Shanghai. However, GM last year said it would return to Singapore, where its consolidated international operations unit oversees markets in ASEAN, Africa, India, South Korea and the Middle East, as well as the European operations of Chevrolet – its best-selling brand – and Cadillac, its luxury marque.
