Market potential justifies plans, TC Subaru says

TC Subaru is a unit of Motor Image Group, a wholly owned subsidiary of Hong Kong-listed Tan Chong International Ltd (TCIL), which handles sales, distribution and manufacturing of Subaru vehicles for Fuji Heavy Industries (FHI) in the region.
FHI announced this month that it would enter a basic agreement next month to form a joint venture with TC Manufacturing and Assembly Thailand (TCMA TH), a TCIL subsidiary, to produce Subaru vehicles in Thailand from 2019. 
The Thai assembly plant is expected to have a production capacity of 10,000 vehicles a year; this would double the capacity of the group in the region, where current production is handled solely by Tan Chong in Malaysia. Subaru resumed its production in the region only in October 2012, through a consignment production contract with Tan Chong, which has also been assembling Nissan and Renault vehicles at its Malaysian factory.
Tawan said the combined output of 20,000 units a year of the Thai and Malaysian factories would not be overly ambitious given the expected coverage of three markets: Thailand, Malaysia and Indonesia, which Subaru plans to re-enter soon. 
“Twenty thousand units for three countries means only 6,000 units for each. This cannot be considered too much,” he said.
Annual sales of Subaru vehicles total just over 3,000 units in Thailand, and fewer in Malaysia. However, Tawan points out that the size of the Thai market has been limited by the fact that it has had to import these vehicles. 
Furthermore, alongside the XV model, Subaru has recently added the Forester to its Malaysian assembly lines. The move has brought down prices and boosted sales of the sport-utility vehicle in the region. 
Tawan said that having the production facility in Thailand would help TC Subaru better manage its costs in this country, even though the cars shipped from Malaysia do not have to pay import duty, thanks to the Asean Free Trade Agreement.
Subaru’s Thai assembly line will be set up at a Tan Chong-owned factory in Bangkok’s Lat Krabang district, which has assembled Fuso trucks.
Despite the Thai production plan, Tawan said TC Subaru is maintaining a Thai sales target of 3,200 this year, down slightly from 2016 when it sold 3,318 vehicles, due to an adjustment in production at its Malaysian plant to prepare for the launch of the allnew XV crossover model in November. 
About 55 per cent of the total sales in Thailand are expected to be for the Forester, with 35 per cent for the XV, and other models accounting for the rest. Last year, the XV snared more than half of the company’s sales, while Forester took about 35 per cent.
Subaru also will maintain its plan to increase the number of its dealerships and service centres in Thailand from 27 last year to 37 this year.
Tawan said prices of Subaru automobiles would be less volatile this year since Tan Chong and Subaru have agreed to offer a fixed foreign-exchange rate for the vehicles that they sell to TC Suburu as the Thai distributor. Consumers have complained about a swing in prices of Subaru vehicles. 
“That was because we wanted to return benefits to customers when we received a gain from a currency fluctuation. But from 2017, there will be no ‘up and down’ price moves,” he said.