Section 4. Overseas Business Expands Globally
Item 3. Southeast Asia and Western Asia
Starting in the mid-1980s, member countries of the Association of Southeast Asian Nations (ASEAN) promoted the creation of major-component plants and vehicle assembly plants, actively encouraging new investment. These measures were intended to increase internal demand in each country and looked ahead to intra-regional exports of not only vehicles but major components, and a complementary system rapidly developed within ASEAN.
In Thailand, TMC established Toyota Motor Thailand Co., Ltd. (TMT), an assembly company, in 1962, and Toyota Auto Body Thailand Co., Ltd., a stamped parts company, in 1978. Later, Siam Toyota Manufacturing Co. Ltd. (STM) was established as an engine production joint venture company in 1987, and production started in 1989. STM was a project conducted in cooperation with competitor companies with the objective of localizing the production of engines for small trucks. In 1988, Toyota Auto Body Co., Ltd., with TMT and others, established a joint venture mainly for truck customization.
In Indonesia, the first-generation Kijang multipurpose vehicle was introduced in 1977, and following the launch of a completely redesigned model in November 1986, the Kijang became Toyota's trademark model. In response to this success, production and sales operations were integrated in January 1989 by consolidating four companies, including assembly and engine manufacturing subsidiaries, with PT. Toyota-Astra Motor Manufacturing Indonesia (TAM), a distributor, as the surviving company. With the aim of conducting integrated engine production, the new TAM expanded its machining line and, in 1991, started operations at its casting plant. Engine exports to Malaysia started in 1989, and following the startup of the casting plant, TAM began exporting engine blocks to Japan.
TMC was compelled to withdraw from business in the Philippines in 1984 because of economic crisis and other factors, but it established Toyota Motor Philippines Corporation as a joint venture in August 1988 and reentered the Philippine market. Semi-knocked down assembly of the Crown, Corolla, and Liteace started in early 1989. In addition, Toyota Autoparts Philippines Inc., a parts manufacturing company, was established in August 1990, and transmission production began in 1992.
In Malaysia, Toyota Tsusho Corporation made a new investment in Sejati Motor, a joint venture company established in 1982, and took other measures to reinforce its capital ties. Sejati's name was changed to UMW Toyota Motor Sdn. Bhd. (UMWT) in October 1987. Assembly of the Corolla had been suspended in 1985 pursuant to a people's car preferential policy by the government in Malaysia, but with the launch of the new company, production was recommenced. As a result, sales of Toyota vehicles increased by 2.7 times from 1987 to 1989 and UMWT was able to eliminate its accumulated losses, which had been carried since it first came into being as Sejati. Also, in 1990, TMC, Koyo Seiko Co., Ltd. (now JTEKT Corporation) and UMWT jointly established T&K Autoparts, a steering parts manufacturer, and the company started operations by producing manual steering components in July 1992. T&K Autoparts became a supply base within Toyota's intra-ASEAN complementary supply system, and more than 90 percent of the approximately 90,000 units that it produced in 1995 were exported.
Against a backdrop of increasing investment in Southeast Asia by Toyota and other Japanese manufacturers, the Brand to Brand Complementation (BBC) Scheme concerning the reciprocal supply of auto parts was established with the signing of a memorandum by six ASEAN member countries in 1988. The scheme allowed for the free export of parts under each automaker's brand, if the parts achieve local procurement rates of 50 percent within ASEAN. The customs duties of each country on eligible parts were cut by 50 percent, greatly reducing barriers to trade.
TMC received approval to participate in the BBC Scheme in 1989, and as discussed above, established TAP in the Philippines and T&K Autoparts in Malaysia in 1990. As a result, TMC established a complementary supply system for diesel engines in Thailand, gasoline engines in Indonesia, transmissions in the Philippines, and steering components in Malaysia. In July 1990, TMC established Toyota Motor Management Services Singapore to coordinate and implement transactions among these four countries.