Honda Consolidates Thai Production, Shuts Down Ayutthaya Plant

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Honda Motor Co. (7267.T) has announced its decision to halt vehicle production at its Ayutthaya factory in Thailand by 2025. This strategic move aims to consolidate production under its newer plant in Prachinburi province, a spokesperson for the Japanese automaker revealed on Tuesday.

This decision underscores the challenging conditions Honda, Japan’s second-largest automaker, faces in the Southeast Asian market. Chinese automotive brands are aggressively seeking to capture market share in Thailand, especially as consumer demand for electric vehicles (EVs) continues to grow.

The Ayutthaya plant, which began operations in 1996, will cease vehicle production next year. Instead, it will shift its focus to manufacturing car parts. Meanwhile, Honda will centralize its vehicle production efforts at the Prachinburi plant, which has been operational since 2016. These two factories are Honda’s only manufacturing facilities in Thailand.

Honda’s combined production at these plants has seen a significant decline, dropping from 228,000 vehicles in 2019 to under 150,000 vehicles annually over the past four years through 2023. Concurrently, the company’s sales in Thailand have also been below 100,000 units annually for the same period.

By consolidating its production, Honda aims to close the gap between vehicle production and sales in Thailand. Despite this consolidation, the automaker has been actively exporting vehicles from Thailand to other Southeast Asian markets, including Indonesia and the Philippines.

Currently, Honda has no plans to make new investments in Thailand, the spokesperson added. This decision reflects broader industry trends, where Japanese automakers, including Honda and rival Nissan Motor Co. (7201.T), are facing stiff competition from emerging Chinese brands. These Chinese manufacturers are attracting consumers with affordable, software-loaded EVs and plug-in hybrids.

The rise of Chinese automotive brands presents a significant challenge for Japanese automakers, who risk losing customers not just in China but also in other markets, such as Southeast Asia. Chinese companies are increasingly expanding their car exports and establishing overseas factories.

For instance, China’s BYD Co. (002594.SZ) recently inaugurated a plant in Thailand dedicated to battery-powered cars. This investment is part of a larger wave of over $1.44 billion from Chinese EV manufacturers setting up factories in the country. This move highlights the aggressive expansion strategy of Chinese brands in the global automotive market.

Honda’s consolidation strategy in Thailand is a response to these market dynamics, aiming to streamline operations and maintain competitiveness amid increasing pressure from Chinese automakers. This shift is indicative of the broader changes and challenges in the global automotive industry, driven by the rapid growth of EV demand and the strategic moves of emerging market players.