fbpx

thailand

Viewing posts tagged thailand

Webinar Executive Summary | How to Approach China Alternatives: Mexico, Southeast Asia & Central Eastern Europe

China Factory

East West experts Mark Plum and Dan McLeod discuss how companies can approach finding alternatives to China for their manufacturing and supply chains, providing examples of companies they assisted diversifying from China while answering questions from the audience.

As manufacturing for export and sourcing in China is becoming more difficult for Western companies due to cost of inflation going up, increasing labor costs, high production expenses, volatile tariffs, political tensions, not to mention new and challenging rules and regulations that continue to evolve – companies are looking for other locations.

These trends are applicable to companies who are operating on the ground in China facilities and relocating them outside or sourcing them out of China for components or raw materials.

The questions to ask when looking to relocate are these:

  • Where is your market?
  • Where are your components and finished goods?
  • Where are they to be consumed?

These three questions will help determine the best solution for your operations.

Attractive alternatives exist for relocating China supply chain & operations, including Mexico, Southeast Asia, and Central/Eastern Europe.

Client Case Study #1 | Moving Operations to Mexico, Clients in US, and North America

The first example was a very successful US-based manufacturer of electronic equipment selling into industrial markets and was established in China since the early 2000s. In addition to manufacturing, they had developed a sourcing office there, and they were sourcing components for their US factories. They had a strong operation with a strong domestic market, growing steadily, and were satisfied with the performance of their operations.

We were engaged a few years ago to initiate a search for suppliers in Mexico after the introduction of the tariffs in China. They also experienced logistics challenges, increased cost and transit times, problems with container availability, along with becoming increasingly concerned about the political situation between China and the US.

The company was looking forward into the future and had some concerns, particularly where their marketplace was somewhat of a high-tech product, were concerned about China’s 2025 policies and the potential for the loss of intellectual property and the loss of control of production.

We provided the company with options for suppliers Mexico to be closer to their clients in the US and North America and visited the top candidates.

Currently, in Mexico, we are finding:

  • Suppliers are fielding more requests than the previous 5-10 years. This is stressing capacity and their ability to respond. Having good relationships with suppliers in Mexico is key to getting their attention, and having local people able to facilitate these relationships is critical.
  • Finding local individuals who can support your negotiations, particularly around freight and logistics, standard terms and conditions, and trade compliance issues is important.
  • For companies that move to Mexico, they can reduce the number of distribution centers they operate in North America since they’ve shortened their supply times by getting closer to the market and have a quicker response time. This also can reduce their inventory holdings.
  • Incentives are not as transparent as other parts of the world – and more time and investment can be required. There is much more raw, undeveloped land on the market that requires more investment in time and capital to get set up as a manufacturing site.
  • Many more small-to-medium sized suppliers, where capital is tight and when faced with the need to expand to supply a significant customer, there are discussions about financing the expansion, unlike you would with a supplier in China for example.
  • When transferring technology to Mexico, it requires more work to develop the specifications and techniques than expected, which can slow the transition process down. This creates a requirement for technical skills within your company to help the transition.

Client Case Study #2 | Moving Operations to Poland and Czech Republic, Clients in Western Europe

Our next example was US global HVAC business, with manufacturing in the Guangzhou province in the 90s. Back then they were able to reduce their bill material cost and total cost between 25-30%. They could have long shipping lead times of 9-11 weeks to get to their different global distribution centers.

We were engaged to look at a new facility to help move it closer to their European markets to ease the shipping times to those markets. We determined the best area was along the Polish and Czech Republic boarder to get their goods into Western Europe, bringing the shipping times down to 10 hours by highway with a strong labor force in place.

Currently, in Eastern Europe, we find:

  • Excellent suppliers for metal fabrication – bending metals, heavy construction, is extremely good, with a strong, skilled workforce.
  • A good source of electronic components relating to automobiles, such as PCB boards, basic chips, etc.
  • A high quality of labor, with a strong work ethic, skilled in industrial, appliances, and automotives. Only difficulty can be with availability, and this is where having someone local who can help sourcing can assist.

Client Case Study #3 | Moving Operations to Thailand, Clients in Southeast Asia

Our last example was a very large iconic manufacturer of electronic equipment selling into industrial markets and was established in China since the early 2000s in Guangdong Province, with growth of their markets in ASEAN.

We were asked to do a study to find a larger facility close to their current one so they would be able to keep their labor force. We demonstrated to them it would be better for their market base if we broadened it to ASEAN to keep their facilities on the cutting-edge, looking at Vietnam, Thailand, and Malaysia.

After negotiating with Thailand’s Board of Investment, we brought our client’s second design center which included their R&D first tier products and the internet of things connected products to Thailand, and the Thai government gave them a 10-year corporate tax holiday and 5 more years at a 50% tax. This saved the company an enormous amount of money compared to if they built a new facility in China.

Currently, in Southeast Asia, we find:

  • Their productivity levels and R&D are equal to those you would find in China with half the labor rates for manufacturing.
  • Your IP is much more protected, and you don’t have to worry about the government of where you are dealing with to try to compete with you.
  • There is still the Treaty of Amity that goes back 150 years where there are no duties, so if your content is over 60% coming back to the US is zero duties from Vietnam.

Tips for Closing a Plant:

When you are going to close a production center in China, you need to anticipate the time involved and put together a solid, upfront plan.

Set aside a two-month period working with corporate management and local leadership to develop solid plans around:

  • Understanding required severance
  • Understanding market practices around severance
  • Communication plans
  • Inventory disposition
  • Whether you need to build up or draw down inventory.

The need for a multi-functional or cross-functional planning is key for a successful plant closing.

 

For assistance or additional questions, please call or contact us at 704.807.9531 or abryant@eastwestassoc.com.

Loader Loading...
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download [536.16 KB]

 

Major Investments in Thailand Focus on Electronic Vehicle Manufacturing

Electric-Vehicle-Charging

The global shift to electric and sustainable vehicles is set to bring about incredible transformation for the planet and its transportation needs, and Thailand is among those leading this charge.

The Thai government strives to become one of the largest world players in Electric Vehicles by 2030, accounting for 30% of their domestic vehicle production. Through subsidized production, import tax reductions, and other incentives, the country is creating a supportive environment for manufacturers to invest in EV production.

The Thai government started subsidizing Electronic Vehicle manufacturing in September of 2022 – granting subsidies for promoting the use of EVs as well as incentives for excise, road, and import tax reduction, production of batteries, and the establishment of charging facilities.

Thailand has an established and robust EV supply chain, making it a prime location for global manufacturers.

Thailand is poised to be a competitive marketplace for cutting-edge technology focused on sustainability.

With rising investments in Thailand coming from a wide range of local conglomerates, automobile manufacturers are positioning themselves for a strong foothold in the EV industry.

Not only are they advancing the technological capabilities of their products but also taking into account the unique challenges posed by a traditional reliance on combustion engines.

Thailand’s Commitment to Electric Vehicle Manufacturing

Thailand has recently made a big commitment to the production of electric vehicles (EVs), and the Thailand Board of Investment is playing a key role in promoting this initiative and working hard to create an environment that is attractive to investors and EV manufacturers alike. This effort helped create a robust supply chain for EVs in Thailand, that can handle the demands of an industry set for significant growth.

Thailand Board of Investment (BOI) is working to promote this initiative and attract investors and manufacturers to the country. The BOI has been working with major global automotive companies from China, Japan, and Europe to centralize EV production and strengthen Thailand’s position as an EV hub in the region.

By promoting Thailand’s manufacturing capabilities, the BOI is gearing up to attract billions of dollars in investment, creating jobs, and helping the country to meet its sustainable development goals. They place sustainability as top-of-mind and wish to be seen as competitive in the marketplace creating cutting-edge technology to curb carbon emissions and improve fuel efficiency.

As demand for EV sales goes up and the cost to the end-user continues to go down, the Thai government hopes subsidies to manufacturers will drive more interest in centralizing EV production. There is currently a strong automotive existing ecosystem with support from Chinese, Japanese, and European EV car makers already in place, making it a safe place to invest and bet on Thailand being a central hub for EV production for years to come.

Thailand has a clear vision for the future of their automotive industry, and the government’s initiatives in supporting the production of EVs demonstrate their commitment to sustainable development. The initiatives that the government is undertaking make Thailand an attractive destination for global players and improve the country’s competitiveness in the EV space. They are looking to become a one-stop service facilitator to EV companies that want to set their regional headquarters in Thailand.

The BOI’s approach towards increasing EV usage in Thailand also takes into account supply chain and infrastructure aspects aimed to make EVs accessible and more practical across the country.

Recently, the BOI just approved a tax holiday package of three to five years for charging service providers. While Bangkok enjoys more than half of the country’s total charging stations, this tax holiday will offset that imbalance and attract investments from all corners of the country, leading to an extensive and robust infrastructure for charging EVs across Thailand and opportunities for more investments to come.

BOI-EV-Charging-Stations

As Thailand continues to attract major global players, it is exciting to see the country’s role in the EV market increase. With the growing popularity of eco-friendly vehicles, Thailand is well on its way to turning this vision into a reality and becoming a key player in the global EV industry. Industries need more governments actively looking to increase access to EVs, and Thailand is showing us how that can be done.

 

Download Article PDF

Loader Loading...
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download [801.03 KB]