Rarely does a democratic country find itself in a situation like the one Thailand is experiencing at the moment. Plagued by a deep political divide that began in 2006 and since caused frequent anti-government protests, Southeast Asia’s second-biggest economy has gone from boom to gloom while the rest of the world was ‘out of office’ over the Christmas break.
Since the latest demonstration wave rolled in last November, the country has been losing an estimated 200-500 million baht ($6-$15m) every day in trade, investment and tourist revenue – effectively reversing the progress made since the GFC.
According to the University of the Thai Chamber of Commerce, Thailand could wallow below three per cent growth in 2014 if the violent clash between government and opposition is to continue – a figure far below potential for the up-and-coming manufacturing hotspot.
On a macro-level, the economic toll is even more concerning – hotel occupancy rates in central Bangkok have plunged, conventions have been cancelled and business deals have been postponed. Investment is on hold.
But local businessmen continue to work hard and help the country survive, lifting the benchmark for innovation and efficiency even in a time of upheaval. According to Malcolm Foster of The Associated Press in Bangkok, they have helped Thailand’s economy bounce back from more than one episode of violent political conflict since 2006 and form the backbone of Thailand’s promising, yet frail economy.
That ability to bounce back is largely due to people like Panus Watanachai, CEO of Panus Assembly in Chonburi. Unfazed by the chaos around him, he has built the family company into a national powerhouse that is now set to start a second phase of expansion which could change the nation’s entire automotive landscape – he is about to establish the first national retail network for the trailing equipment industry.
The revolutionary plan would see the widely unorganised trailer building segment catch up with the automotive industry and change the way parts supply and vehicle maintenance are carried out in Southeast Asia. And while multi-national businesses are still concerned about expanding in the crisis-torn region – Toyota’s Thailand chief Kyoichi Tanada just announced political stability is a key factor in whether or not the brand will keep investing in Thailand – Watanachai has one advantage: As a local, he is well accustomed to the economy’s unnerving up and down and has faith in the people of Thailand to change tack once again.
Born and raised in a humble family home that is now surrounded by the wide-spread factory complex, Watanachai has lived and breathed trailer building all his life, spending his spare time roaming the factory floor and helping out where he could – a typical “hands-on childhood”, as he has it.
After attending high school and achieving a Bachelor’s Degree in Marketing at the University of Loyola Marymount in California, Watanachai spent a while learning the tricks of the trade in a financial services firm before returning to Thailand. Then aged 23, he was found ready to take the helm of his father’s 40-year-old business. “I was appointed CEO as soon as I got back from California. I was literally handed over the keys to the factory, and my dad said ‘make it work’,” he recalls. “It’s been an honour, but also quite a shock at such young age.”
At the time, Panus had become a well-established name in the trailer building industry, but the young CEO soon realised the old family business needed to diversify to survive. “If I learned one thing in the US, it is that you need to keep reinventing yourself to remain successful,” he says. “In an economy as volatile as Thailand, silo thinking can be fatal. Of course I knew that diversification is an unpredictable, high-stakes game, but on the other hand, all major business decisions involve a certain degree of uncertainty, don’t they?”
Just as it is important to take stock of the pantry before going shopping, Panus Watanachai started off restructuring the family business by identifying the company’s unique competitive advantage. “Our key strength was trailer building, of course,” he says. “That’s why we focused our energy there first.”
Under the guidance of ‘graduate CEO’ Watanachai, Panus first experimented with aluminium as a lightweight building material, but development stopped as commodity prices began to surge. The company then tried to establish the B-double in Thailand – a common high productivity design in Australia and South Africa – but shunned the red tape associated with the project. Watanachai even invited representatives of the Thai government out to Australia to illustrate the advantages of the concept in a real life demonstration.
“There is so much potential in the field of High Productivity Vehicle (HPV) design, but Thailand is not ready yet. Our road and bridge network is just not capable to handle the extra weight and the government is too caught up in everyday business, so we need to wait until infrastructure development and legislation finally catch up.”
According to Watanachai, the promising B-double project is currently put on hold until the right framework is established, but could be resuscitated quickly when the time is right. “Back then, Thailand was turning into a second Detroit and it felt like everything was possible. The B-double idea may have come too early, but it definitely showed us the way.”
Fuelled by government incentives to attract foreign investment, Thailand experienced an automotive gold rush at the time and Panus Watanachai, a well educated and internationally thinking CEO, was right amongst it. “Suddenly there was a highly specialised workforce available and domestic demand was rising by the day; it was an inspiring environment for those willing to take a risk.”
Luckily, Watanachai’s openness to risk was backed by strong car carrier sales, giving him ample room to find the right modernisation strategy. Supplying the automotive industry in eastern Bangkok, Rayong, Chachoengsao and Chonburi, the family company built more than 2,000 specialised trailers by the mid-2000s and held a solid 40 per cent share in the market.
But Panus Watanachi always knew the boom had a use-by date. “It was a profitable business and we enjoyed the ride, but it was obvious the surge would cause a disbalance in the long run,” he says. “The car carrier boom was subsidised by the Thai government and we knew those subsidies would expire at some stage, so we had to keep looking for alternatives to not get caught by surprise.”
Still convinced that diversification was the key to success, Watanachai decided on a more conservative approach and focused on military equipment and the component market instead. “If the vast majority of sales are based on one model only, it just makes sense to look at diversification,” he says. “But, we also learned from the past. The market has to be ready for the product, and the product has to suit the company. That’s why we decided to diversify horizontally – there was no need to add more bulk to the trailer line-up.”
Now engaging in highly sophisticated military projects that brought additional know-how and complete ISO certification into the company, Panus’ engineering team soon began exploring the component market. “Manufacturing had always been our core competency so moving into the component market was a logical decision. We had the know-how, we had the right people and we certainly had the drive,” says Watanachai – revealing that the company’s first new product, a range of stationary liquid tanks, proved a huge success.
To promote the product beyond Thailand, Watanachai entered into a Joint Venture with an Australian company, which helped refine the design and promote it in the mining community, where it continued to be a sales success.
“It’s been an untapped market and we discovered it first, which was a great success for the company and me as the new CEO – plus it balanced out the drop in car carrier sales,” he recalls. “Not to mention the experience of starting an international joint venture, which is something we have done a lot since we first tasted blood.”
Inspired by the success in the component market, Panus began revising the entire transport equipment portfolio. “We realised that our product range was too ramified to be successful, so we started reducing the amount of product variants and began thinking in a more structured way,” he explains. “Looking back, it’s quite ironic. We were looking to diversify, but then realised we needed to cut back first. It’s been a steep learning curve for us.”
With revenue spread out across the military, component and trailer building division, the ‘new’ Panus brand soon began to flourish. “Each part of the business supported the rest, which allowed R&D to work more freely and in turn boosted our creative output,” says Watanachai.
“The trailer building division certainly benefitted the most from this development. We had a look at the automotive industry and slowly introduced a lean, modular production scheme that reduced our inventory and increased our production rate. It’s a typical Thai success story, really. We fly high, we take a risk, we stumble, but we always bounce back.”
Given that unswerving optimism, it is no surprise that Panus exited 2013 as the largest and fastest-growing domestic manufacturing brand. And, while mainstream media keep reporting that foreign investment may flow to Malaysia, Vietnam and Singapore if the conflict drags on, now 38-year-old Panus Watanachai is more hopeful.
“I don’t want to be too political but try to control what I can control. We have been working hard to get where we are, and I think the economy is strong enough to survive the situation relatively unscathed. Just look at 2011, which was basically an off-year due to massive flooding all over the country. We were written off but came back from that as well.”
In fact, Panus is already planning the first post-election coup. “Now that our trailer line-up has a clear structure to it, we want to follow the automotive and truck industry and establish the first national retail network for the trailing equipment industry,” he says. “No middlemen, no buying off the peg. We want to give our customers a new retail experience that hasn’t even existed in Thailand before, where the purchase is 100 per cent transparent and going through the OEM itself.”
According to Watanachai, setting up a nation-wide distribution network is still a vision only, but exploratory talks with potential associates from the truck industry are underway. “Imagine the synergies on a sales and maintenance level – it would change the entire trailer market. There is so much potential.
“You may imagine endless beaches and rice paddies when you think of Thailand, but that’s not the case; there so much more to it. The automotive industry is still going strong and domestic demand is rising by the day, so the logistics industry will remain busy in the foreseeable future too.”
As one of Southeast Asia’s most successful CEOs under 40, Panus Watanachai is convinced Thailand will be “back to normal” by the end of 2014. Until then, he will keep living in the old family house amidst the ever-growing factory complex and do what he does best – explore, learn and grow.