Honda cuts Thailand production by 60%, delays second plant plans
Military coup and political uncertainty in Thailand has led Honda Motor Co to scale down production at the company plant in Ayutthaya by as much as 60%. This reduction in production follows fears of falling domestic demand as Honda Motors cites sales concerns which may fall below targets this year due to this political unrest in the country.
Honda Motor falls prey to political instability in Thailand as army chief, General Prayuth Chan-Ocha takes control of the government in a coup. The company had instantly reduced production at their plant with concerns of weak domestic demand while Honda has also been forced to close down factory at night to comply with curfew orders.
Honda Motor Co has also decided to delay commencement of their upcoming plant by between 6 months to a year. This new plant in Prachinburi, built at an investment of $530 million was previously expected to commence operations in January 2015. Besides Honda Motors, the entire auto sector is steeped in uncertainty. The sector has fired over 30,000 subcontract labourers during the year and drastically reduced production following months of political unrest.
The Honda Ayutthaya plant has an annual capacity of 300,000 units while the upcoming plant in Prachinburi will have annual capacity of 120,000 units. Thailand’s political stalemate has entered its sixth month taking a toll on Thailand’s economy and having an adverse effect on Southeast Asia’s largest auto production hub. In March this year, Thailand auto production fell 29% while sales saw a dip of 47% as compared to sales a year earlier. This political impact is noted across board and effects the supply chain with automakers delaying launch of new models till such time that domestic situation improves.