Honda Motor, the second-largest car manufacturer in Japan, recently announced its plan to consolidate production at its Prachinburi facility in Thailand. This decision means that automobile production will cease at the Ayutthaya facility by 2025. The move reflects the challenges Honda is facing in Thailand, including increased competition from Chinese companies and growing consumer interest in electric vehicles (EVs).
Over the past four years, Honda’s combined output from both facilities has declined from 228,000 vehicles in 2019 to less than 150,000 vehicles annually. In terms of sales, the company has consistently sold less than 100,000 vehicles in Thailand during this period.
Honda’s spokeswoman stated that the Ayutthaya facility will continue to focus on manufacturing vehicle components after it stops producing vehicles next year. On the other hand, the Prachinburi factory, built in 2016, will be used for integrating automobile production.
The goal behind consolidating production is to address the disparity between the number of vehicles Honda produces and its sales in Thailand. Moreover, the company already exports its products from Thailand to other Southeast Asian countries like Indonesia and the Philippines.
While Honda has no plans to invest further in Thailand, it faces stiff competition from Chinese manufacturers, particularly in mainland China. Rising Chinese companies offering affordable plug-in hybrids and EVs with advanced software are attracting a significant number of customers. This competition poses a risk for Japanese automobile manufacturers like Honda and Nissan, who may lose customers in Southeast Asian countries to Chinese brands.
Chinese manufacturer BYD recently opened a plant in Thailand to produce electric vehicles. This investment is part of the wave of Chinese companies establishing facilities and expanding operations outside of China. These investments in Thailand alone exceed $1.44 billion.
The automotive industry landscape is changing rapidly, and Japanese manufacturers like Honda must adapt to remain competitive. Consolidating production in Thailand is a strategic move by Honda to streamline operations and address market challenges. However, the company will need to keep a close eye on the growing presence of Chinese manufacturers in Southeast Asia and continue to innovate to meet the demands of consumers interested in EVs.
