More details have come to light on the impact on automotive production in Thailand as floods continue to devastate central, north and northeastern areas of the country, with Toyota and Ford joining Honda in plant shutdowns due to the direct flooding of facilities and the impact on the supply chain.
As reported last week, (read more here) floodwaters have broken barriers at industrial parks in Ayutthaya and Pathumthami, which are major production clusters for parts manufacturing. Ayutthaya is also home to a Honda production facility and the carmaker has sustained the most severe disruption because that assembly plant is flooded, with an estimated loss of production for the month of between 10,000 and 15,000 units. The plant is expected to be down for five weeks according to a report released today by Frost and Sullivan.
Toyota and Isuzu plants in Chachoengsao have also stopped production because of supply chain disruption in Ayutthaya and Pathumthani provinces and are expected to lose between 2-3 weeks of production. Estimated production losses are expected to be around 30,000-35,000 units for Toyota and 10,000-15,000 for Isuzu.
Almost 10% of total auto parts for local production come from the affected areas and the disruption is also affecting Mitsubishi and Auto Alliance Thailand (AAT), which makes Ford and Mazda models. Nissan is maintaining normal production but is also expected to be hit by supply chain disruption.
The total average monthly loss of production across the carmakers affected is estimated to be between 80,000-100,000.
General Motors is the least affected OEM due to its plant and supplier base being located in Rayong in the south of the country, outside the flood affected areas.
Carmakers are likely to compensate for the loss of production by making short-term shifts to other ASEAN regions, especially Indonesia and Malaysia.
Frost and Sullivan’s report states that the floods are having a cascading effect on assembly and production with up to 40 parts suppliers supplying to most assembly plants in Thailand being affected.
The problems also have wider international implications. In 2010 almost 900,000 vehicles, more than half of total vehicles assembled in Thailand, were exported. The main export markets include Australia, New Zealand, Europe, the Middle East, Mexico, South Africa and Brunei.
With supply chain disruption being the main reason for production shutdowns the report outlines a number of factors for OEM consideration going forward.
These include an increase in the stockpile of automotive parts and a revision of the just-in-time delivery strategy in an effort to ensure that OEMs have enough stock for at least a month in the event of any future disruptions. A similar strategy of securing ‘safety stock’ has recently been announced by Toyota as part of a five-year plan to overhaul the supply chain in the wake of the Japanese earthquake in March (read more here).  
OEMs are also likely to look at a multi-sourcing strategy, involving sourcing parts from different suppliers as well as different regions, again similar to OEM plans in the wake of the earthquake.
Finally, Frost and Sullivan identify what it terms a “climactic de-risking of the supply chain”, involving investments by OEMs in locations least impacted by natural disasters.
“Japanese OEMs in India, especially Honda, have already started increasing their localization content (80%-90%) and the remaining auto parts are likely to be supplied either from Japan or other ASEAN regions,” say the report’s authors.
The disruption in Thailand is not expected to have a long-term effect on automotive production there.