Aapico Hitech Public Co. Ltd. continues to branch into plastics. The Southeast Asian maker of automotive jigs wants to double sales in plastics in three years, tackling this ambitious goal by establishing a fuel tank plant and looking for joint venture partners in polymers.
The Ayuthaya, Thailand-based company kicked off the effort in 2006 when it acquired the plastics molding and metals assets of another Thai firm, KPN Automotive Public Co. Ltd. After unexpected difficulties integrating KPN, which dragged down earnings last year, the firm now says it aims to boost its involvement in plastics by investing 500 million Baht (US$15 million) in various ventures in the next 18 months.
As a start, Aapico announced a JV earlier this year in Thailand with Minth Group Ltd., a large Chinese auto parts maker. Minth is supplying extrusion technology in plastic and metal, and Aapico is bringing access to Thailand's car market, dubbed the ``Detroit of Southeast Asia.'' Thailand manufactures about 1.2 million vehicles a year and turns out more 1-ton pickup trucks than any other country in the world.
But the Minth venture is just a start, and the company is looking for more partners.
Japanese trading house Sojitz Corp. owns 15 percent of Aapico. The Tokyo-based company also owns a stake in Minth and Sumi Motherson Group of Noida, India, a US$625 million company that crafts auto wiring and plastic components for the automotive and consumer electronics. Motherson said it is the largest supplier of electrical distribution systems for the Indian automotive industry.
Aapico does some business with Motherson and is looking for the right conditions to establish a partnership in plastics with the company in Thailand, possibly to make car bumpers, it said.
Aapico also has started construction on a plastic fuel tank blow molding plant in the same Rayong, Thailand-based industrial park as the Minth venture, using equipment from Kautex Textron GmbH & Co. KG. Aapico wants to broaden from its existing base making steel fuel tanks.``We are still looking for very basic technology [regarding plastics],'' said Yeap Swee Chuan, president and chief executive officer of Aapico, in a June 10 interview at the firm's molding plant in Samutprakarn. ``We are still a young baby in this area. I've been a steel man all my life, and I'm going into plastics.''
The company also is trying to grow outside automotive, and this year took over work transplanted from Australia for plastic molding and assembly of heating and air conditioning units, and now ships 350 units a day back to Australia.
It intends to upgrade equipment it buys in the future, looking at areas such as two-component molding, and has bought two Japanese-made electric injection presses since the KPN purchase, said Eric Bermann, chief operating officer of the company's Aapico Plastics Public Co. Ltd. subsidiary, in Samutprakarn.
The company derived the bulk of its 2007 sales of 9.7 billion Baht (US $293 million) outside plastics, including in metal stamping, chassis construction, metal forging, car dealerships and new areas such as GPS navigation systems.
For plastics, it has 48 injection presses and will have two blow molding machines for fuel tanks and related parts in the new venture. It doesn't break out plastics-specific sales for its units, but said last year it had sales of at least 650 million Baht (US $19.6 million) in plastics.
Increasing competition from places like China and India, along with a shortage of capital, also are pushing the company to seek more partnerships, Aapico said in its 2007 annual report.
But Yeap said rising costs and more difficult business conditions in China are making Thailand a more attractive location.
Aapico stands to benefit from Thailand's attempts to develop as a base for economical and environmentally friendly cars, according to reports in the Thai press.
Seven automakers, including Honda, Tata Motors and Volkswagen, have expressed interest in the project, which includes some tax breaks to attract investment.
Yeap said Aapico has started work on some metal and plastic parts for the ecocar projects, which government officials hope will add several hundred thousand vehicles a year to the country's auto production base and broaden its exports beyond pickup trucks.
Thailand's vehicle production is projected to top 2 million cars by 2011, and that could rise to 2.5 million by 2017, Aapico said.
The country's vehicle production rose 23 percent in the first quarter of 2008, to more than 460,000 units, led by surging export growth of 25 percent, Aapico said.
The country's domestic auto market dipped in 2007, but grew 15 percent in the first quarter of 2008, the company said.
But there are dark clouds on horizon, with rising fuel prices, political strife in Thailand, and what Yeap said was of most immediate concern, deteriorating conditions in Vietnam's economy and the risk it could spread.
That country's stock market has dropped 60 percent this year and inflation is at 25 percent. Vietnam's deteriorating currency situation with one exchange rate in the black market and another set officially by the government has started to weaken Thailand's currency, the Baht.
``It's almost a sign like last time Thailand collapsed [in 1997],'' he said. ``My biggest fear today is Vietnam.''
He added, however, that he was optimistic the Thai economy will meet its projections for auto production.