THAILAND: THE DETROIT OF ASIA ….. and its near future DEFAULT!


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THAILAND BOARD OF INVESTMENT
Head Office: 555 Vibhavadi-Rangsit Rd.,
Chatuchak, Bangkok 10900, Thailand
Tel.: (+66) 2553 8111, Fax: (+66) 2553 8222,
Website: http://www.boi.go.th, E-Mail: head@boi.go.th

Opportunities in Thailand’s Automotive Industry

Thailand has shown impressive economic growth over the past decade. A combination of sound economic fundamentals and steady development makes this vibrant Southeast Asian economy fertile ground for continued automotive investment. The automotive industry is a vital sector for the Thai economy. It is the third-largest sector in the country, accounting for 12% of GDP. The industry contributes greatly to international export and trade inflows. With government-led support, automotive has evolved into an industry with vibrant foreign OEM competition, and an extensive network of related and supporting industries. Thailand’s long experience with automotive manufacturing has resulted in a comparatively low-cost yet experienced labor force for the automotive industry.

Thailand Deafult ans Detroit

Thailand, due to its POLITICAL, ECONOMICAL, but most of all for SOCIAL situation (intended as the social class differences but over all EDUCATION) other then CORRUPTION levels near the top in the world, even if dreams (or better already defines itselfs) HUB for automotive, logistic, turistic, medical, technologycal, will have soon the same future of Detroit, and on the beginning of 2015, when the AEC (the Asean Economic Community) will start.
The typical “ignorance” of thais, the absolute missing of being HUMBLE, the willness to LEARN, their proverbial LAZYNESS, will bring Thailand to be the photocopy in Asia of what Italy is in Europe.
The same dynamics are on going, super accelerated by the really bad EDUCATIONAL SYSTEM, by a TOURISM that is SEXUAL based (the scuba divers are already moving to Malaysia, Mynamar, Vietnam….) and by their (the thais) being always ARROGANT, trying always to SCAM the tourists / expats (for them we are only “farangs”).
The SHOWDOWN is near the corner…..

Thailand currently has approximately 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers. More than half of the Tier 1 suppliers are multinational firms. Of the top 100 auto parts manufacturers in the world, 50% have factories in Thailand. The country’s manufacturing base is strong enough to supply all necessary parts, from engine parts to interior and body parts.
Big Industry Drivers

Several multinational automotive manufacturers have announced investments in Thailand since 2010. Ford has begun construction of a US$450 million state-of-the-art plant that will have an initial annual capacity of 150,000 passenger cars, with production starting in 2012. The plant covers 750,000 sqm at the Rayong site. Toyota’s US$133 million factory expansion to 200,000 units per year includes its international multipurpose vehicle. Following expansion at its Ban Pho plant, Toyota reached a milestone by producing its five-millionth car in Thailand.

Mitsubishi is starting work on a US$500 million eco-car manufacturing plant in Chonburi Province, the company’s largest-ever investment in Thailand and its biggest facility outside Japan. Chevrolet Thailand’s plant in Rayong has been awarded landfill-free status certifying that it produces no waste for landfills and recycles for reuse. Audi, Volkswagen and the U.S. firm Navistar, a manufacturer of commercial and military vehicles, each recently expressed an interest in building production plants in Thailand.

In other industry developments, Mazda began delivery of its Mazda3 2.0L car to Thai customers in June 2011. Tata intends to launch more truck models domestically in September, adding to its local presence of one-ton pickups.

AUTOMOTIVE INDUSTRY OVERVIEW

Thailand’s automotive industry export value in 2010 was US$13.5 billion, split equally with half from CBU cars, pickups and motorcycles and the other half from auto parts. This makes it Thailand’s third-largest export sector after electronics and electrical appliances. Parts imports totaled nearly US$7.8 billion in 2010.

Thailand presents many advantages for prospective investors in the automotive industry, including a large pool of skilled labor at competitive wages and an abundant supply of rubber.

The country is also moving toward production of more fuel-efficient vehicles, including the hybrid, plug-in hybrid, and electrical and fuel cell-powered models, with the introduction of special reduced excise tax rates for those vehicles.

Thailand ranks No. 12 among automotive manufacturing countries, producing 1.64 million vehicles in 2010. It aims to reach 2.3 million units overall by 2014, which would put Thailand in the top 10 worldwide. Japan is the No. 1 destination of Thai-manufactured automotive products.

 

THAILAND’S AUTO PARTS INDUSTRY

Demand for Thai-made automotive parts is growing. In response, there are already approximately 1,800 such suppliers in the country, of which about 700 are OEMs. Since all major Japanese automakers have opened production sites in Thailand, many of their parts manufacturers such as France’s Valeo, Germany’s Bosch, U.S.-based TRW, Britan’s GKN and Japan’s Denso, Mitsuba and Mitsubishi have followed suit to serve their customers. According to the Japan Automobile Manufacturers Association, the quality of automotive parts in Thailand is the highest of any ASEAN nation. Fifty of the top 100 global OEM parts suppliers operate in Thailand.

 “Automotive manufacturing in Thailand has developed a lot. Right now more than 90% of parts of pickup trucks are manufactured in Thailand.”

Mr. Kyoichi Tanada, Managing Director of Toyota Motor Thailand

and President of Japanese Chamber of Commerce in Bangkok

 

Components make up 63% of Thailand’s automotive parts exports, followed by body parts at 17% and engines at 12%.

AUTOMOTIVE ELECTRONICS

Innovation in electronic systems is driving today’s automotive parts industry. The emerging Asian market will play a central role in this growth, both as a producer and a consumer. In addition to being the site of much automotive production, Asia is also one of the regions with the strongest demand for automotive electronics.

Most of the automotive electronics used in the cars produced in Thailand are imported from Malaysia or Japan. The value of these imports exceeds US$4 billion. Given the market size, the currently limited number of automotive electronics producers in Thailand presents an excellent investment opportunity.

OPPORTUNITIES

Thailand is as an attractive base for automotive parts production. Of the more than 3,000 parts and components in a typical vehicle, many of them still must be sourced from overseas. Opportunities exist for foreign suppliers to manufacture fuel injection pumps, transmissions, injection nozzles, anti-lock braking systems, and central locking systems, among numerous other products. More R&D, design and testing centers are also needed, even though Yamaha, Bridgestone, Maxxis and Michelin already operate such facilities in Thailand.

Hi-Tech Vehicle Parts and Components

Projects in high-tech vehicle parts and components manufacturing are considered priority activities by the Thailand Board of Investment (BOI), which means they are exempt from machinery import duties, regardless of zone, and exempt from corporate income tax for 8 years, also regardless of zone. Some examples of eligible activities are electronic fuel injection systems, ABS brake systems, substrates for catalytic converters, automatic transmissions, continuously variable transmissions, traction motors, electronic stability controls and regenerative braking systems.

NGV Cars

The Thai Ministry of Energy supports fuel-efficient transportation through a natural gas vehicle (NGV) initiative. The initiative involves the introduction of over 10,000 natural gas-powered taxicabs, natural gas subsidization through PTT Public Company Ltd., and exemption from import duties for new natural-gas-powered cars, components and transport vehicles. Carmakers will be able to receive a reimbursement of up to US$1,667 on excise taxes when their customers convert their cars to run on natural gas.

Manufacturing Automotive Parts for International Standard Eco-Cars

Eco-cars continue to receive incentives in order to promote market growth locally and abroad.  For instance, incentives are applied to materials that cannot be produced locally. The duty reduction will be granted up to 90% for 2 years with annual review. The new measure is intended to help eco-car manufacturers by lowering their production costs and reducing their burden in sourcing parts. This measure also encourages more investment in eco-car parts production, which provides the country with economies of scale and a greater competitive advantage in the global eco-car production business.

Passenger Cars

Although Thailand has a strong focus on pickup trucks, passenger cars receive similar favorable treatment in manufacturing promotion. The requirements for the promotion of passenger car manufacturing include a minimum capacity of 100,000 units per year over 5 years. The size of the investment, exclusive of land cost and working capital, must not be lower than US$500 million (THB 15 billion) within the first 5 years of corporate tax holidays.

E-85

Thailand’s Ministry of Finance is offering a 3-year exemption on the import duties of foreign auto parts used to make vehicles E85-ready. The ministry has also reduced the excise taxes on cars using E85 to 25%, 30% and 35%, depending on engine size.

Big-Bike, 4-Stroke Engine Motorcycles (over 500cc)

Under the new scheme, a minimum annual capacity will not be required, whereas previously it was set at 50,000 units/year or more. There are also no restrictions on foreign ownership, compared to a minimum of 60% Thai ownership previously required. Regardless of the plant locations, big-bike motorcycle manufacturing activities will be eligible for exemption from import duties on machinery. For projects that include engine manufacturing starting from machining key parts, such as cylinder heads and crank cases, the corporate income tax holiday may be extended for 3-8 years depending on the plant location.

Vehicle Tires

Firms manufacturing vehicle tires are exempt from machinery import duties and corporate income tax for 8 years regardless of zone.

WHY THAILAND

Thailand has been called the “Detroit of the East” for its consistent government policies that promote automobile assembly and manufacturing in the country. Nearly every Japanese carmaker has manufacturing facilities in Thailand, as do major U.S. automotive companies such as Ford and General Motors, and the German firms Mercedes-Benz and BMW. With so many of the world’s leading automakers manufacturing here and the economy growing strong, the country’s automotive industry will continue to expand in coming years. Geography is also a benefit of investing in Thailand, a gateway to Asia providing easy access to regional markets.

In addition to the BOI’s wide range of fiscal and non-tax incentives for investments, Thailand boasts a highly skilled and affordable workforce, with the automotive industry currently employing over 450,000 people. To foster greater productivity and efficiency in the industry, the government has encouraged the development of auto parts clusters. Proximity between firms and their input suppliers allows for not only enhanced communication but also the improved flow of goods and lower costs. There are many industrial estates that focus on the automotive industry and provide state-of-art facilities for auto parts manufacturers. Furthermore, Thailand’s extensive road networks, well-developed seaports and Bangkok’s Suvarnabhumi airport make exporting automotive parts efficient and fast.
FOR FURTHER INFORMATION:
Thailand Board of Investment (BOI):  www.boi.go.th
Thailand Automotive Institute (TAI):  www.tahiauto.or.th
Thai Automotive Industry Association (TAIA):  www.taia.or.th
Thai Autoparts Manufacturers Association (TAPMA):  www.thaiautoparts.or.th
ASEAN Supporting Industry Database (ASID):  www.asidnet.org

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