Updated Information on Trade and Investment Opportunities in Thailand: Automotive Industry Part 2 Ms.Nattinee Netraumpai Assistant Director Thailand Board of Investment, Frankfurt Office
Major Trade Partners in 2007unit: million Baht EU Imports: 403,243 Exports:672,824 China Imports: 564,591 Exports: 510,756 Hong Kong Imports: 50,147 Exports: 298,955 USA Imports: 330,663 Exports: 662,741 Japan Imports: 988,536 Exports: 625,061 ASEAN Imports: 872,365 Exports: 1,119,956 Korea Imports: 184,223 Exports: 102,298 Australia Imports: 132,191 Exports: 197,516 Source: MOC
Thailand’s FTA CHINA: 1.3 billion population ASEAN-China FTA (Under Negotiation) KOREA: 48 million population ASEAN-Korea FTA ( Under Negotiation) ASEAN-EU FTA (Under Negotiation) Thailand-EFTA: 13.5 million population (Norway, Iceland, Switzerland and Liechtenstein). (Under Negotiation) JAPAN : 128 million population ASEAN-Japan FTA US : 300 million population Thailand-USA FTA (Under Negotiation) INDIA : 1.1 billion population ASEAN-India FTA (Under Negotiation) BIMSTEC: 1.4 billionpopulation(India, Burma, Sri Lanka ,Thailand, Nepal, Bhutan, Bangladesh) (Under Negotiation) Thailand-Japan FTA (under implementation) PERU: 28 million population Thailand-Peru FTA (under implementation) Thailand-India FTA (Under negotiation) NEW ZEALAND : 4 million population ASEAN-New Zealand FTA (Under Negotiation) ASEAN: 550million population AFTA Effective Date: Thailand-China: October 2003 ASEAN-Australia-NZ: Will be implemented in late 2008 Thailand-India: Early harvest Sept 1, 2004 ASEAN-EU: Negotiations began in 2003 Thialand-India FTA: Late 2008 early 2009 will be implemented ASEAN-Korea: Aug 2006 Thailand-Japan: April 3, 2007 ASEAN-India: Will be signed in Dec; put into effect in early 2009 Thailand-Korea: Concluded negotiations in Jan 2008 ASEAN-Japan: Implemented late 2008 Thailand-Peru: Implemented in Nov 2008 ASEAN-China: July 1,2005 Thailand-US: Negotiations began in 2003 AFTA: July 1, 2003 Thailand-EFTA: Negotiations began in May 2005 TAFTA: Jan 1, 2005 Thailand-NZ: July 1, 2005 BIMSTEC: Negotiations on goods concluded in 2005 for implementation in 2006 Negotiations on service: investment; concluded in 2007 Thailand – NZ FTA (implemented) AUSTRALIA :20 million population ASEAN-Australia FTA (Under Negotiation) Multilateral Thailand – Australia FTA TAFTA (implemented) Bilateral
Thailand – ASEAN Trade in 2007unit: million Baht Laos Imports: 16,296 Exports: 45,208 Cambodia Imports: 1,689 Exports: 46,718 Myanmar Imports: 80,031 Exports: 33,064 Vietnam Imports: 38,655 Exports: 130,856 Malaysia Imports: 299,903 Exports: 268,614 Philippines Imports: 74,630 Exports: 99,965 Singapore Imports: 218,708 Exports: 328,169 Indonesia Imports: 138,551 Exports: 164,228 Brunei Imports: 3,900 Exports: 3,134 Source: MOC
Thailand-ASEAN Trade Source: Bank of Thailand, as of June 25, 2008
Structure of Thai Automotive Industry Assembler LSEs (Car 16 Companies, Motorcycle 7 Companies) Foreign J/V Tier 1 Pure Thai 23 % Foreign Majority 47 %. Thai Majority 30 % (Total 648 Companies) SMEs Tier 2,3 Local Suppliers (1,641 Companies) [* LSEs : Large Scale Enterprises SMEs : Small & Medium Enterprises] The data updated in January 2005 by TAI
MAPPING OF AUTO-ASSEMBLERS Pathumthani - Thai Suzuki Motor (MC) • Samutprakarn • - Toyota Motor Thailand • - Isuzu Motors (Thailand) • - Siam Nissan Automobile • - Thai Yamaha Motor (MC) • - Tiger Motor (MC) • - Thai Swedish Assembly • Thonburi Automotive Assembly • - Hino Motors (Thailand) Ayudhaya - Honda Automobile (Thailand) Bangkok -Thai Honda Manufacturing (MC) • Chachoengsao • Toyota Motor Thailand (2 Plants) • Triumph Motorcycle (MC) Cholburi - Mitsubishi Motors Thailand Rayong - Auto Alliance (Thailand) - General Motors (Thailand) - BMW Manufacturing (Thailand) - Kawasaki Motors Enterprise (Thailand) (MC)
Automotive Assemblers in Thailand 98% Exported at Laem Chabang Port-LCP Source: Port Authority Thailand, Dr.Siri Jirapongphan
PRINCIPAL AUTO PARTS PRODUCTION SITES Pathumthani Total suppliers: 39 Body Parts: 18%, Engine Parts; Electrical Parts: 13% each, Suspension & Brake Parts: 10%, Drive, Transmission &Steering Parts; Accessories: 8% each, Other: 31% Rayong Total suppliers: 41 Body Parts: 24%, Engine Parts; Drive, Transmission &Steering Parts: 15% each, Suspension & Brake Parts: 12%, Electrical Parts: 10%, Accessories: 7%, Mold&Die: 2%, Other: 15% Bangkok Total suppliers: 232 Body Parts: 9%, Engine Parts; Electrical Parts; Drive, Transmission &Steering Parts; Accessories: 6% each, Suspension & Brake Parts: 4%, Mold&Die: 3%, Other: 60% Chonburi Total suppliers: 55 Body Parts: 25%, Engine Parts: 22%, Drive, Transmission &Steering Parts: 15%, Electrical Parts: 9%, Accessories: 5%, Suspension & Brake Parts: 4%, Mold&Die: 4%, Other: 16% Samutprakarn Total suppliers: 158 Body Parts: 22%, Electrical Parts: 15%, Engine Parts; Drive, Transmission &Steering Parts: 8% each, Suspension & Brake Parts: 5%, Mold&Die: 4%, Accessories: 3%, Other: 36%
Engines Diesels, Motorcycles Engine Components Starters, Alternators, Pumps, Filters, Hoses, Gears, Flywheels Body Parts Chassis, Bumpers, Fenders, Hoods, Door Panels Brake Systems Master Cylinders, Drums, Discs, Pads, Linings, Steering Systems Steering Wheels, Gears, Columns, Pumps, Linkages Suspensions Shocks, Coils, Ball Joints Transmissions Gears, Casings, Rear Axles, Drive Shafts, Propellor Shafts Electrical/Electronics Alternators, Starters, Speedometers, Lamps, Motors, Flasher Relays Interiors/Exteriors Seats, Mats, Weather Strips, Console Boxes Others Windshields, Seat Belts, Radiators, Wheels, Compressors Parts Manufactured in Thailand
Major Steel Makersin Thailand • Sahaviriya Steel • Siam Steel • Nippon Steel • JFE Steel • ArcelorMittal Steel • Baosteel • TATA Steel
Opportunities: Components not Sufficiently Produced in Thailand • Passenger Car Engines • Fuel Injection Pumps* • Transmissions* • Differential Gears • Injection Nozzles* • Electronic Systems • Electronic Control Units • Turbo Chargers* • Substrates for Catalytic converters • Anti-Lock Brake Systems • NGV Equipment target: 99,000 NGVs by 2008
World OEM Automotive Electronics Demand * Estimated. Source: The Freedonia Group.
Asia-Pacific OEM automotive electronics demand, 1996-2016* * Estimated Source: The Freedonia Group.
Distribution of Thailand’s Tier-1 Automotive Suppliers Source: Company information; Thai Automotive Institute; Thai Department of Business Development; and SVI Public Co., Ltd.
Thailand’s OEM Automotive Electronics Demand, 1996-2016 * Value in USD. ** Value in millions of USD. *** Estimated. Source: The Freedonia Group.
Thailand’s Automotive Electronics Technology Road Map Source: Thailand Embedded Systems Association.
• Growing consumer demand for automobiles, particularly those with high-technology components • Strong presence of automotive OEM manufacturers • Existing car assembly bases and R&D centers • Strong disc drive and integrated circuit industry • Relative ease of doing business • Strong governmental support: incentives for automotive, high-technology and R&D investors; promotion of a knowledge-based society; supporting organizations Thailand’s Automotive Electronics: Strengths Source: Thailand Sectoral Study Report: Automotive Electronics by Tractus (Thailand) Co., Ltd.
Thailand’s Automotive Electronics: Opportunities • Growth of the automotive sector, particularly within the Asian region • Increasing demand for cars with advanced electronics systems • Emissions regulations and move towards a fuel-efficient economy • Improved safety standards • Growth of automotive entertainment electronics sector • FTAs • Special BOI incentives for select automotive electronics activities Source: Thailand Sectoral Study Report: Automotive Electronics by Tractus (Thailand) Co., Ltd.
Liberal Investment Regime • No export requirements • No foreign equity restrictions in manufacturing sectors • No local content requirements • No location requirements in all but 6 activities (for environmental protection)
Basic BOI Incentives TAX INCENTIVES • Corporate income tax holidays up to 8 years • Import duty reductions or exemptions on machinery and raw materials NON-TAX INCENTIVES • 100% Ownership • Land rights for foreign investors • Permission to bring in foreign experts and technicians • Work permit & visa facilitation
BOI Basic Promotion Packages 3 Investment Promotion Zones to promote industrial decentralization Zone: 1 2 3 Incentives: Lower Higher
Passenger Car Project • Start of Production 2010 • Total investment 20,893 mil. Baht • Increase total production capacity 140,000 units • Estimate export volume 109,000 units • Employ over 2,058 staff
R&D and Skill Labors Thailand is a very attractive location for R&D, product development and marketing activities for emerging markets. • In 1991, Isuzu established “Isuzu Technical Center of ASIA (ITA)” to promote localization of pickup trucks development and transferred from Japan to Thailand to enhance R&D base in ASEAN. • In 2003,Toyota established a technical and testing R&D and recently established a new company “ Toyota Motor Asia Pacific Engineering and Manufacturing (TMAP-EM)” • In 2005, Asian Honda Motor established a design and development center for motorcycles “ Honda R&D Southeast Asia” and Honda Motor established “ Honda R&D Asia Pacific” for automobiles. • In 2008, Nissan lunched “Nissan Value-up” and established Nissan Technical Center South East Asia (NTCSEA) for expanding in the Asian Market. Source: Thailand Automotive Institute
Incentives: Automotive Industry Cluster (Assemblers & Suppliers) Conditions • Total investment over 10 billion baht (including component parts manufacturing) • Covers: • Automotive Assembling • Manufacture of Vehicle Parts and Engines • Total Investment at least THB 10 Billion Incentives • Import Duties on Machinery Exemption, regardless of zone • Corporate Income Tax Exemption by zone
Passenger Car Assembly Incentives Conditions • minimum investment no less than 15 billion baht • within 5 years of income tax holiday period • must have actual production not less than 100,000 units per year in any of the first five years of production Incentives • 5- year corporate income tax holiday in any zone • Projects in Zone 1, 2 or 3 receive import duty exemption on machinery
Incentives: General Car Assemblers • No corporate income tax holiday in any zone • Projects in Zone 1 receive 50% reduction of import duty on machinery • Projects in Zone 2 receive • 50% reduction of import duty on machinery if setting up outside industrial estate • Exemption on import duty on machinery if setting up inside industrial estate • Projects in Zone 3 receive import duty exemption on machinery
Incentives for Natural Gas Vehicles Current status 55,868 NGV vehicles* 166 NGV service stations* NGV on national agenda: Government Targets 99,000 NGVs by 2008 • New BOI NGV incentives: • NGV parts production including engines, tanks and other parts • Production of natural gas equipment and machinery for NGV service stations • Priority Incentives: 8 year corporate income tax holiday, duty free machinery regardless of location • NGV assemblers and NGV service stations: duty free machinery regardless of zone Remark: * Dec 2007 figure from www.pttplc.com
Investment Incentives for Automotive Component & Part Manufacturing Zone 1 Zone 2 Zone 3 General Machinery Duty: 50% reduction Corporate Income tax exemption: In IE - 7 years OutsideIE - 3 years Machinery Duty: Exempt Corporate Income tax exemption: exempt 8 years Machinery Duty: 50% reduction Corporate Income tax exemption: In IE - 3 years High-Tech Exempt from machinery import duties Exempt from corporate income tax for 8 years • Examples: Electronic Fuel Injection Systems, ABS Brake Systems, Substrates for Catalytic Converters, NGV Parts, Molds/Dies
Additional incentives for skills, technology, and innovation (Optional) • Investment and Expenditures on: • Research and development or design • Advanced technology training • Funding of educational and research institutes Note: Corporate income tax holiday may not exceed eight years.
Investment Matchmaker Program 1-Stop for visas & work permits: work permits in 3 hours Industrial Subcontracting Vendors Meet Customers Program (BUILD Unit) ASEAN Supporting Industry Database (ASID) Interaction with other govt. agencies on behalf of investors Country desks Overseas offices Internationally-acclaimed support services: Dedicated to creating an enabling environment for investment
BUILD Activities • Provide information on subcontracting opportunities in Thailand via database web applications • Assist foreign buyers wishing to source from Thai manufacturers • Match buyers and subcontractors in related businesses • Arrange participation of Thai manufacturers in trade shows and exhibitions abroad Website: http://build.boi.go.th
Benefits to Supply Chain • Buyers can locally source parts for domestic or global production needs • Suppliers can produce according to the needs of clients, streamlining their inventory • Demand and Supply work in-sync to enhance productive capacity
ASEAN Supporting Industry Database-ASID ASID features a wide range of supporting industry products classified under 5 main industry sectors to assist users in penetrating a specific market - Automotive Industry - Electronics and Electrical Industry - Petrochemical, Paper and Plastic Industry - The Mold and Die Industry - Other Industries
THAILANDOF INVESTMENT The perfect opportunity www. boi.go.th Thailand—Each Piece Fits Perfectly.