Double digit growth predicted for Asean market

Electrolux new washing machine factory in Rayong is the company’s first in South East Asia.
     The 9000 square metres large plant, a THB 500 million investment that opened 27 November 2003, is wholly owned and will produce 5 and 7 kilo front loaded washing machines under the Electrolux and Zanussi brands.
     China and India are the closest countries in Asia with other Electrolux production facilities.
     So why a new plant in Asean and in Thailand?
     “Thailand has a good supply of subcontractors that manufacture metal and plastic parts. This thanks to the strong automotive industry here. Our suppliers are located close to our plant which is very convenient. Communications are excellent in the province and we have the deep sea harbour Laem Chabang close by which facilitates exports,” says Mr Johan Bygge Senior Executive Vice President Electrolux AB.
     Another important factor is the positive market trend for Electrolux in Asean.
The average GNP growth in Asean is 5 – 6 percent annually and Electrolux’ sales grow approximately double that number.
     “That is why we were prepared to take the next step and introduce production in the region,” says Mr Fredrik Ramen, President Electrolux South East Asia.
     A third reason to go give green light for the Thai plant is the regional AFTA agreement.
     The acronym stands for Asean Free Trade Area and aims to reduce tariffs within the ten countries that are members of Asean, the Association of Southeast Asian Nations.
     “We hope we can have more competitive pricing in Asean thanks to the regional manufacturing site and beneficial AFTA customs tariffs,’ says Johan Bygge
     The Rayong plant will produce 200 000 washing machines per year and have 200 employees when it is up to full speed 2004.
     If need be there is ample room to grow, adding more production lines, within the existing site.
     Major markets for the Rayong made products are Thailand and Asean, where the Swedish brand already commands a 40 percent market share in its segment of front loaded washing machines.
     “Our ambition is to manufacture competitive washing machines for Asean,” says Fredrik Ramen and adds that later on markets like the Middle East may be supplied by the Thai factory as well.
     Electrolux sales in South East Asia is expected to reach around sek 1.3 billion for the full 2003 with an expected growth double that of the average GNP growth in Asean.
     Last year sales in Asean reached SEK 1 billion.
     Thailand, Indonesia and Malaysia are the biggest markets within Asean.
     Initially most of the washing machine parts are imported from Europe but Thai suppliers will be phased in as soon as possible.
     Electrolux global growth in the 1990’s was driven by a combination of improved sales and aggressive acquisitions of competing brands.
     The latter caused some doubts about the corporate identity as many new brands were added to the Electrolux family.
     But the company is now moving towards a stronger emphasis on the original brand again.
     “Our Asian operations were first in the group to focus on the Electrolux brand. You will also see more co-branded products than now from the company in order to strengthen the Electrolux brand,” says Johan Bygge.
     Net sales in the Electrolux Group for the first nine months 2003 amounted to SEK 95,762 Million compared with SEK 102,564 million the same period last year. About one tenth of the decrease is due to change in exchange rates.
     While sales in Asean are up, the group’s consumer durables in China and India faced problems and dropped considerably in the nine months due to restructuring and downsizing.
     Some improvement in that segment’s operations in China and India during the third quarter 2003 will not affect the general negative picture in the two countries, according to Electrolux nine months report, issued late October 2003.

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