Yesterday, Tan Chong International Limited (TCIL), the parent company of Subaru's distributors in many Asian markets (including the Philippines), officially opened their new assembly plant in Lat Krabang in Thailand.
The new plant, known as Tan Chong Subaru Automotive Thailand (TCSAT), will be assembling the Subaru Forester from complete knock down (CKD) kits from Japan, and will have a capacity of 10,000 units per year.
Being that the Forester will be assembled in an ASEAN country, it can benefit the many ASEAN markets that Subaru Asia, under Tan Chong's Motor Image, given the tax breaks the model can enjoy. But despite that, we were told by Tan Chong executives that the vehicles built at TCSAT will not be bound for the Philippines, the presumption being that the models made at TCSAT will be initially right-hand drive. Or so we thought.
During the official opening, we spotted that TCSAT will be producing left hand drive (LHD) vehicles for markets like Vietnam. So we ventured the question to Glenn Tan, the Deputy Chairman and Managing Director of TCIL.
The Subaru Boss confirmed that TCSAT will be producing left hand drive models but in smaller numbers for LHD markets such as Vietnam, but not for the Philippines... yet.
The reasoning behind Tan's decision to withhold Thai-assembled Subaru models for the Philippines for the time being is to be able to test the quality with a smaller volume Forester market such as Vietnam. Being that TCSAT is Tan Chong's first major foray into automotive assembly for Subaru, Tan wants to ascertain the consistency of having both LHD and RHD coming from the same factory before selling the product to a bigger market such as the Philippines.
Testing low volume production for Vietnam prior to Philippines is a logical move, as having LHD and RHD models built in the same line could present a host of problems for the new TCSAT factory, and their chief executive simply wants to iron out all the kinks before shipping them to the Philippines where the Forester's sales performance is crucial.
According to Motor Image Pilipinas General Manager Gerry Hernandez, Subaru Philippines sells about 130 units of the Forester per month. Vietnam on the other hand sells only about 10 per month.
If Subaru can shift production of Philippine-spec models to Thailand, the model could benefit from reduced tariffs because of the ASEAN Free Trade Area. Currently, the Japan-made Forester does not benefit from any tax breaks because the engine sizes do not make it eligible for the reduced duties under the Japan-Philippines Economic Partnership Agreement. JPEPA rules state that the engine size should be at least 3.0 liters, or 3000cc, to qualify.
Recently, Mazda was able to shift production of the CX-5 crossover to the INOKOM plant in Malaysia, making it eligible for the tariff schedules of ASEAN FTA. The extra leeway brought about by reduced obligations means car companies can either lower the price, gain more profits, or add more features.