Thai Fiesta points way for Ford and Oz industry

Ford has been fighting an uphill battle to gain market acceptance for its Fiesta model ever since the car was introduced in Australia four years ago.

While critics generally praised the tiny car for its dynamic ability, that hasn't translated into market-leading sales. Little wonder, when the Fiesta is priced up against vehicles such as the Toyota Yaris, Hyundai Getz and the Mazda2 -- all built in countries where the cost of labour is considerably lower. At a retail level, Ford sales teams have had one arm tied behind their collective back where the Fiesta was concerned...

All that's about to change for Ford Australia. The new generation of Fiesta -- which will debut locally at the Australian International Motor Show in Sydney next month -- will be built at the Auto-Alliance plant in Thailand (AAT).

Ford's Ranger and its BT50 twin are the fruits of the joint Mazda Ford plant already sold in Australia. So too the Mazda2. Thus the plant will expand capacity to 100,000 units a year when the Fiesta comes on line, says Whitney Foard Small, Ford's Director of Communications for the Asia Pacific and African regions.

A fan of the Boston Red Sox, Ms Small was born in New York but considers herself a native of the US state of Maine. Her extensive knowledge of the region under her purview comes from time spent growing up in the East African states of Kenya and Tanzania, and studying in Thailand.

Explaining how Thailand transformed from an economy largely dependent on agriculture and tourism for foreign earnings, to one that is also a thriving automotive manufacturing base, she attributes the change to a far-sighted government that, through taxation incentives, encouraged appropriate investment by the automotive industry.

"It was a 'perfect storm' of events," she told the Carsales Network -- a once-in-a-century mix of circumstances that coincided to prompt Thailand's transformation from agrarian and tourist-dependent economy to large-scale automotive exporter to occur.

"We had a government of technocrats that knew what they were doing.

"When [the Thai government] started to institute the automotive policy -- to encourage the growth of the industry -- [it was] in order to give makers and suppliers access to a domestic market they could count on, to get the domestic economies of scale, as well as the ability to export, which is why they built the eastern seaboard.

"So that's where our plant is. That's where almost all the automotive plants are, on the eastern seaboard. That whole area was part of an infrastructure build-out, so that you could have ease of parts coming and going as well as fully built-up and kit vehicles coming and going.

"So... they looked around at what could Thailand specialise in? What could Thailand do that would be right for the domestic market but also provide the industry with something that could be exportable...

"They made the excise tax three per cent for pick-up trucks -- purposely, in order to jump-start the industry, but also because of the way Thais used the trucks. It's always a working vehicle. Now that is where the innovation came for double-cabs and all that as a way to enlarge the possibilities.

"That was the way makers could get the economies of scale necessary, because there was strong enough demand in the local market for a vehicle that was priced that [at a level] Thais could afford -- and I mean Thais, country Thais," Foard Small said.

The Thai government settled on promoting the manufacture of automotive products and electronic consumer goods as two additional props for the local economy and followed the model established by the Japanese, developing the domestic market for vehicle sales before turning an eye towards exports.

Success begets success, and with the improving perception of Thai quality allied to such gains as the Free Trade Agreement between Australia and Thailand, the Asian country is enjoying increased exports of all automotive products, not just light commercial vehicles.

The upshot for Ford is that it should be able to sell more Fiestas into the local market, helping the bottom line for the company, both here and abroad. With the reduced landed cost of the new Fiesta, combined with being in a stronger position to do deals on the locally-built Focus when that is launched in 2010, Ford is about to extend its reach in the light and small car segments -- in a big way.

And is there a lesson for Australia?

Granted the Australian context is very different from Thailand's, but the Thai experience shows that a sympathetic government can put in place the proper legislative framework to help an industry find its feet in a short space of time. Some will argue that the Bracks report recently handed down on the local automotive industry doesn't go far enough (and Thailand's recent history supports that) while others will suggest a wait and see approach.

We're watching and waiting...

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