Published on November 2009
Thailand’s automotive industry to see growth accelerate Supported by a hard-work ethic, steady investment and
for automotive applications. Thailand, in fact, is the only
country outside of the 30-nation Organization for Economic
Co-operation and Development in which Toyota has such
employing more than 300,000 people and generating 12% of
the national GDP, the auto industry is respected as one of the biggest manufacturing sectors in the country.
Optimism and Opportunity
Thailand’s industry has attracted virtually all of the world’s
The automotive industry in Thailand is looking to further
major automakers, assemblers, and parts and component
growth and development. Such optimism stems largely from
manufacturers, and many are planning further investment.
free-trade agreements (FTAs) with countries such as Japan,
Ford, General Motors, BMW, DaimlerChrysler, Mitsubishi,
China, South Korea, Australia, New Zealand and India, and
Mazda, Toyota, Isuzu, Honda and Nissan all have an
the prospect of rising exports to ASEAN member nations. As
established presence in the country, together accounting for
the industry contributes significantly to the local economy,
the lion’s share of the nearly 1.4 million vehicles produced
the Thai government is also offering support in the form of
here in 2008. That is a far cry from when Thailand had just
tax incentives and various other measures, making Thailand
one automotive assembly plant in 1961.
fertile ground for investors.
Truly a global player, the Thai industry has expanded from its
In June 2009, the Thailand Board of Investment expanded its
days as strictly an assembler into a major automotive
automotive incentive scheme to cover automobiles that have
production center. Automotive exports totaled 775,652 units
high technologies that are new to Thailand, such as hybrid
in 2008. With shipments steaming to 130 countries, Thailand
drive, brake energy regeneration and electronic stability
is currently the world’s largest producer of one-ton pickup
control. The BOI’s new policy, which is designed to attract
trucks and the seventh-largest automotive exporter overall.
international automakers looking to restructure by relocating
It is the top manufacturer in all of Southeast Asia, with
production facilities overseas, provides a range of incentives,
measures in place for expansion.
including corporate income tax holidays of between 5 and 7 years. To be eligible, projects must involve a minimum
And it’s not just production. More foreign makers now
investment of 10 billion baht.
appreciate Thailand as a prime location for R&D investment as well. For example, in recent years Toyota has established
a technical facility here to conduct R&D work on product
design, testing and evaluation. Moreover, Toyota Tsusho
promoting fuel- efficient transportation through a natural gas
Electronics (Thailand) Co., Ltd. was established in 2005 as a
vehicle initiative. Growth opportunities also exist with E85
joint venture between Toyota Tsusho Electronics Co., Ltd.
ethanol. Thailand’s Ministry of Finance is offering a 3-year
and the Toyota Tsusho Group to develop embedded software
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.
Published on November 2009
Expect to see more environment-friendly cars coming down
There are many other reasons, hundreds in fact, why
the road. In perhaps one of the most exciting stimulus
measures, the BOI and the Ministry of Finance are offering
production. Of the more than 3,000 parts and components in
maximum incentives to eco-car manufacturers in Thailand.
a typical vehicle, many of them still have to be sourced from
Under the new program, the BOI offers an 8-year corporate
income tax holiday and duty-free importation of machinery to
manufacture fuel injection pumps, transmissions, injection
eco-car part projects that have a minimum investment value
nozzles, anti- lock braking systems, and central locking
of 10 million baht. The Finance Ministry allows makers to pay
systems, among numerous other products. More R&D, design
a reduced excise tax of 17% on cars with petrol-powered
and testing centers are also needed, even though Yamaha,
engines smaller than 1,300cc and diesel-powered engines
Bridgestone, Maxxis and Michelin already operate such
1,400cc. As the excise tax
passenger cars is currently 30 to 40%, the tax reduction on eco-cars amounts to a US$2,000 drop in the sticker price.
Demand for Thailand-made automotive parts is growing. In
That is a juicy incentive for consumers and manufacturers
suppliers in the country, of which about 700 are OEMs or
original equipment manufacturers. Since all major Japanese auto
automakers have opened manufacturing sites in Thailand,
assemblers have already proposed investments totaling an
many of their parts manufacturers, such as France’s Valeo,
annual production capacity of 675,000 eco-cars. The first
Germany’s Bosch, U.S.-based TRW, Britan’s GKN and Japan’s
made-in-Thailand eco-cars are expected to roll off assembly
Denso, Mitsuba and Mitsubishi have followed suit to serve
lines in early 2010.
The eco-car sector in Thailand promises growth opportunities
for parts and component manufacturers as well. In July 2009,
Association, the quality of automotive parts in Thailand is the
the BOI announced a 90% reduction on the import duties of
highest of any ASEAN nation. Local parts manufacturers
eco-car raw materials and parts that cannot be produced
supply nearly all the requirement used in the assembly of
locally. Again, this will benefit manufacturers and consumers
motorcycles, about 85% of parts used in pickup truck
by lowering production costs and retail prices. Granted for a
assembly, and as much as 70% of those for passenger cars.
period of two years and subject to annual review, the 90% import duty reduction should spur investment in eco- car
Thailand’s exports of auto parts more than quadrupled
parts manufacture in Thailand, making the local industry
between 2003 and 2008, as locally produced vehicles and
more competitive globally.
components continue to gain global acceptance. The value of auto parts exported from Thailand exceeded US$4.6 billion in 2008, the fifth consecutive year of
Published on November 2009
Thailand’s FTA with Australia calls for the elimination of tariffs on commercial vehicles, passenger cars, and their parts and accessories in 2010. The Early Harvest Scheme with India provides for lifting tariffs on hydraulic systems, speedometers and gear boxes next year as well. The majority of China’s and New Zealand’s tariffs on auto parts and accessories are scheduled to be cancelled in 2010. The
increases the market potential for local parts producers. Under the JTEPA, tariffs on all but five automotive parts will double-digit growth. Growth will continue as the government
be lifted by 2012.
works to push Thailand into the top 10 of automotive The Thai people are a plus as well, as the country boasts a
skilled workforce. Labor costs here are lower than in many In 2008, most of the automotive electronics used in the cars
other areas of Asia. The land and facility costs are also
made in Thailand were imported from Malaysia or Japan.
competitive. Moreover, the government is encouraging the
These imports were valued at US$4 billion. Given this market
development of so-called auto parts clusters, where proximity
size, the currently limited number of automotive electronics
between manufacturers and suppliers will result in further
producers in Thailand presents an excellent investment
cost and efficiency benefits.
opportunity, particularly for value-added systems. There are also many industrial estates that focus on the automotive industry and provide state-of-art facilities for
Attractive Investment Site
manufacturers. Exporting automotive parts in Thailand is a But why choose Thailand? With many of the world’s leading automakers
breeze with the country’s extensive road networks, welldeveloped seaports and several international airports.
rebounding, the country’s automotive industry is expected to continue to expand in coming years. Consequently, demand
In addition to the policies on tax reduction, there are non-tax
incentives that the Thai government offers to manufacturers
Currently, passenger cars are seeing the highest growth in
of vehicles and vehicle parts, and for automotive R&D and
total industry sales.
testing. These include land ownership rights for foreign
investors, Geography is also a benefit. A gateway to Asia, Thailand provides easy access to regional markets. The country’s
many FTAs include terms advantageous to local auto parts producers. In particular, the agreement with ASEAN opens
As additional assistance, the BOI provides the Unit for
the door to a collective market of 585 million people in the
Industrial Linkage Development and also maintains the
association’s member nations. Auto parts exported to ASEAN
ASEAN Supporting Industry Database, a comprehensive
nations are currently subject to a tariff of less than 5%, and
online database of more than 20,000 ASEAN suppliers.
the tariff will be eliminated entirely in 2010.
Automotive Industry report from BOI (Nov 2009)