Automotive Industry. Thailand: Partnership for Growth in Asia

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1 Automotive Industry Thailand: Partnership for Growth in Asia The success story of Thailand's automotive industry is not an accident; its history began since 1960 with a small domestic consumption. However, after years of contributions from related government agencies and the private sector, Thailand gradually built a very strong market and become more and more successful. In 2013, Thailand is now ranked the 9th largest car producer in the world and the largest in Southeast Asia, with approximately 2.5 million vehicles being produced. The government expects the number of automotive production will increase to 3 million units by With the AEC approaching in 2015, ASEAN will play more vital role as an increasingly important market and a major global production base. Thailand will continue to promote the nation's appeal as an investment location within Asia and as a gateway to ASEAN for automakers. In order to ensure the sustainable development of Thailand's automotive industry, the government will focus on development strategies such as offering a favorable government policy to promote investment and domestic market expansion through systematic integration. Also, Thailand will aim to accommodate technology changes by enhancing the capacity of green technology development and increased domestic value creation through productivity improvement for parts manufacturers.

2 Along with the government's plan, the Thailand Board of Investment regards the automotive industry as a priority sector. This is the reason why BOI, together with our overseas partners, organized the seminar "Automotive Industry - Thailand: Partnership for Growth in Asia" in 3 European cities - Munich, Paris and Gothenburg - themajor centers for automotive companies in each country, from 8-10 April The BOI mission was led by Ms. Duangjai Asawachintachit, deputy secretary general of Thailand Board of Investment (BOI), together with Ms. Piengjai Kaewsuwan, president of The Thai Automotive Industry Association (TAIA) and other BOI officers. The seminar began in Munich, the largest city in the state of Bavaria, Germany, on 8 April at PwC Haus Munchen with participants from automotive or relatedautomotive companies in Germany and neighboring countries. This event was organized by PricewaterhouseCoopers, German Asia-Pacific Business Association and the German Chamber of Commerce and Industry. It began with greetings from Mr. Felix Kuhnert, Automotive Industry Leader of PricewaterhouseCoopers followed by H.E. Nongnuth Phetcharatana, ambassador of Thailand to Germany, who gave welcoming remarks. The next to speak was Deputy Secretary General Duangjai from the BOI, speaking on the subject of "Thailand - An Asian Hub, A World of Opportunity". She began her presentation with reasons why Thailand is such a great 'partner for growth in Asia'. Firstly, she said it was because Thailand is the perfect location at the center of ASEAN and can be used as a gateway into the larger Asia market. In its Ease of Doing Business report 2013, the World Bank continued to move Thailand towards the top by ranking the kingdom 18th of 186 countries and among the top-20 for several years now. In the UNCTAD survey, Thailand is ranked among the top 10 Prospective Host Economies for , one of only two countries in Southeast Asia. Apart from a supportive business environment, not many countries can combine attractiveness as an investment site and demonstrated ability to produce for the global marketplace with a low cost attractive lifestyle like Thailand can. The office space in Bangkok is among the most affordable in Asia and our corporate tax rate was cut to 20%, lower than Indonesia, Malaysia and Vietnam. Furthermore, Thailand was ranked No.2 in the world in the HSBC expat lifestyle survey of 2012 in terms of overall expat experience, based on expat's lifestyle, especially the ease with which expats can set up in their new country, how well they integrate into the local community, and their overall quality of life.

3 Later, DSG Duangjai gave information on incentives and policies of the BOI in for Automotive Industry. Manufacture of passenger cars, given that the conditions listed are met, will get exemption of import duties on machinery regardless of zone and a 5-year exemption of corporate income tax regardless of zone. For the manufacture of vehicle parts (general parts), incentives include an exemption of import duties on machinery and an exemption of corporate income tax depending on zone, with cap. Further, for certain parts with high technology such as ABS, substrate for catalytic converters, electronic fuel injection systems, automobile transmission, battery for electric-powered vehicles, traction motor for automobile such as hybrid or fuel cell cars, electronic stability control (ESC), regenerative braking system, electric air conditioning system for automobile, rubber tires for vehicles, aircraft tread tires and electronic parts for vehicles, an 8-year exemption of corporate income tax as well as an exemption on import duty on machinery for all zones will be given. Lastly, Ms. Duangjai presented some statistics from the JETRO Survey of Japanese-Affiliated Companies in Asia and Oceania. In the motor vehicle/motorcycles industry, over 80% of firms in Thailand expected to be profitable while in China and India was at 70% and 40% respectively. Following the BOI presentation were Ms. Piengjai Keawsuwan, president of the Thai Automotive Industry Association (TAIA) and representatives from PricewaterhouseCoopers and German Asia-Pacific Business Association providing useful details on trends and latest developments within the Automotive Sector in Thailand-ASEAN. According to the Thai Automotive Industry Association, the total car production volume from 6 countries in ASEAN in 2013 is 4.4 million units. Thailand is the largest production base in ASEAN, with production of 2.5 million units (1.2 million units are for the domestic market and 1.3 million are exported), followed by Indonesia with 1.2 million units. A sample of major multinational automotive companies in Thailand includes Toyota Motors, Mitsubishi Motors, Isuzu, Honda Automobile, Nissan Motors, General Motors, Suzuki Motors, BMW Manufacturing, Ford Motor and Mazda. Total car sales in 2013 remained at an impressive record in Thailand, with a total of 1.3 million units, which is the largest market among ASEAN countries. The product champions of Thailand are pickup trucks and eco-cars. The next step is to become the hub of research and development.

4 Mr. Christoph Stürmer from PWC said the production in Thailand was dominated by Japanese companies, of which Toyota ranked 1st at 33% of total light vehicle production. However, until 2020 alliance groups are set to make significant entries while Toyota is merely sustaining production volume - based on current information. (See graph 2) As stated in the Master Plan for the Automotive Industry of the Thai Ministry of Industry , both government and private sectors have generated the vision to develop the Thailand Automotive Industry as "a global green automotive production base with strong domestic supply chains, which create high value added for the country" Thailand represents itself as a place where OEMs can invest with the intention to tap into rapidly-growing markets, and where suppliers of all types can move to better serve their OEM partners. At the moment, there are over 20 companies for manufacturing (car and motorcycle), approximately 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers, all locating their factories in Thailand. This accomplishment clearly reflects a strong supply chain structure to support this industry. The next station on the seminar tour was Paris. The event was organised by BOI and Fédération des Industries des Equipements pour Véhicules (FIEV) on 9

5 April. The seminar followed the same pattern as the event in Munich, this time beginning with a welcome speech by Mr. Bernard Babo, chairman of ASEAN- India Club, FIEV and opening remarks by H.E. Mr. Apichart Chinwanno, Ambassador of Thailand to France, following by BOI and a testimonial from auto-part makers. On 10 April, BOI concluded its journey in Gothenburg, a major automotive city in Sweden, and with the largest harbor in Scandinavia. The seminar was coorganised by Business Sweden at the Scandic Opalen hotel. With a location at the heart of Asia, strong supporting industries, an efficient workforce and liberal investment regime and investment incentives from the BOI, Thailand certainly is an excellent place for automakers and related industries.