NOT many companies in other industries have contracts that will continue into the next decade. But that happens to be the case for auto parts manufacturer Ingress Corp Bhd.  

"We have contracts in the pipeline right till 2012," executive vice-chairman Rameli Musa said in a meeting with StarBiz.  

Car companies change models every five years. There is usually a lead time of about two years from concept to mass production and Ingress is involved in the design stage from the beginning.  

A design contract now for a new model will see mass production of the car only in 2007, and the model will continue to be manufactured for five years, that is, until 2012. "When we get a contract, it's usually good for five years," he said.  

Ingress produces mouldings for various components as well as steel-based door sash (industry jargon for the metal frame around car doors).  

The group recently reported a 28% increase in net profit to RM15mil for the year ended Jan 31, 2005. The company said its automotive component manufacturing (ACM) division in Thailand experienced revenue growth of 45% last year.  

Rameli Musa

Rameli said the revenue in Thailand totaled RM75.2mil last year. Further, the largest portion of the group's earnings was derived from the Thai operations, he added.  

The dominance of earnings from Thailand is visible on the group's bottom line where it can be seen the group did not incur any taxes last year. Its profits in Thailand are still tax-free under a tax holiday incentive.  

In contrast to the expansion up north, the group's ACM division increased its revenue by only about 8% last year.  

That differing growth rate could partly be due to the fact that Ingress' sales to its principal customer here, Perusahaan Otomobil Kedua Sdn Bhd (Perodua), is just starting to increase.  

Ingress is a Tier-One vendor for Perodua, but it is not a similar position in relation to Perusahaan Otomobil Nasional Bhd (Proton). Even if it were, a successful vendor in Thailand would be engaged in a bigger business than over here by virtue of the larger auto market there.  

Industry data shows that Thailand has a larger total industry volume (TIV) than Malaysia, which is often billed as the largest car market in Asean. It is true in the sense that Malaysia has the largest market for passenger cars but for motor vehicles, including trucks, Thailand's output is more than twice Malaysia's.  

More important, the industry is growing at a faster rate in Thailand due to a large export sector.  

Thailand produced a total of 930,000 motor vehicles last year and that is projected to expand to 1.1 million units this year. In comparison, Malaysia's TIV was 490,000 units last year.  

Although the bulk of auto sales in Thailand are in trucks, sales of passenger cars are also increasing there. In time, such sales in Thailand will also exceed that of Malaysia's as consumers in the former become affluent and given its larger population.  

Ingress' presence in Thailand is expanding in tandem with the industry growth there. It is building its third plant in Thailand. This is located in Ayuthia to be close to a major customer Honda that has an assembly plant in that town.

Ingress' existing two plants are in Rayong where Mazda, its first customer in Thailand, has its factory.  

The new plant will cater to contracts for a new Honda model. Currently, Ingress supplies auto parts for the Honda City, Accord and Jazz. As Rameli put it, existing businesses can lead to contracts for new models as well as in the supply of a wider range of components for new models.  

Although Ingress' earnings showed an improvement last year, it was achieved in spite of provisions for losses of about RM7mil in the rail electrification division. The provisions were made as a result of delays in the construction of the double-tracking rail tracks between Rawang and Ipoh. Such provisions will not recur this year.  

Besides Thailand, Ingress has also made headway in Indonesia where it started operations a couple of years ago. "We're optimistic in Indonesia in the long run, just like we were optimistic of Thailand when we started," Rameli said. 

The road ahead for the Ingress group is likely to lead to further earnings improvement, especially as growth in its ACM division will not be slowed by provisions in the rail electrification division this year.