Thailand is a global player in the worlds automotive industry, exporting automotive products to 130 countries worldwide. Since its first automotive assembly plant in 1961, the sector's continuously high growth has made Thailand the world's largest producer of one-ton pick-up trucks, the seventh largest automotive exporter, and the fourteenth largest automotive producer in 2007, producing 1.3 million vehicles. Ford, General Motors, BMW and Daimler Chrysler, in addition to all the major Japanese manufacturers - Mitsubishi, Mazda, Toyota, Isuzu, Honda and Nissan - have all established presences in Thailand.
List of Company in Automobile Industry
Toyota, Isuzu, Nissan, Mitsubishi, Chevrolet, Mazda, Ford, Hino, Honda, Suzuki, Hyundai, Proton, Tata, Mercedes, BMW, Volvo, DFM, Mitsufuso, Kia, Volkswagen, General Motors.
Contribution in GDP
The auto industry is Thailand's third largest industry, making up about 12% of GDP & employing over 300.000 people at the end of 2011.Thailand at 25 ranks in purchasing power $609800000000 out of it Agriculture: 13.3%industry: 34%services: 52.7% (2011 EST.) [1]
3. Labor force available for Automobile Industry
The local auto industry employs 520,000 workers involved in everything from parts manufacture to final assembly. Thailand has quite low unemployment rate (lower than 2%) for 6 consecutive years. Labor available for industry is 13.2%. In April 2012, the new minimum wage rate at 300 baht per day will be imposed in 7 provinces in Thailand, namely Bangkok, Phuket, Nakornpatom, Nonthaburi, Patumthani, Samutprakarn, and Samutsakorn.
4. Raw material available for Automobile Industry
In conjunction with Thailand's huge automotive industry, Thailand has a developed a sizeable and thriving auto parts and accessories industry. Between 2003 and 2007, exports of auto parts grew by 386% and were valued at over USD 4 billion in 2007.The Japan Automobile Manufacturers Association (JAMA) states that the quality of automotive parts in Thailand is the highest among ASEAN countries. Locally produced or assembled parts include engines, suspension control and spring, axles, hubs, propeller shaft, brakes, clutches, steering systems, body parts, electronic parts, air conditioning systems, tires, wheels, internal and external trim components and glass. However, considering that there are more than 3,000 parts and components in a typical vehicle. Imported parts and accessories include fuel injection pumps, transmissions, aluminum casting, injection nozzles and anti-lock braking systems, are all imported. Local part manufacturers supply about 100 percent of parts used in the assembly of motorcycles, 80-90 percent of parts used in the assembly of pickup trucks, and 30-70 percent of parts used in the assembly of passenger cars.
5. Supplier Details
Thailand automobile assemblers have created three-tier suppliers networks. With regards to Tier 1 suppliers (690 companies), 47 percent are foreign majority JV companies, 30 percent are Thai majority JV companies and 23 percent are pure Thai companies. In addition, there are also approximately 1,700 Tier 2 and 3 suppliers, which are locally owned small and medium enterprises (SMEs). The Thai Automotive Industry Association (TAIA) estimated that the automotive industry generates approximately 700,000 jobs in Thailand - automobile assemblers employ approximately 50,000 workers, auto part producers 350,000 workers, car distribution networks (e.g. dealers) 200,000 workers, and raw material suppliers 100,000 employees.
Japanese automobile producers have been playing an important role, accounting for 80 -90 percent in production, domestic sales and export activities in Thailand (see figures 2-4). Toyota alone accounted for 38 percent of production, 41 percent of domestic sales and 37 percent of exports. Those Japanese automobile producers generally entered the Thai market in the early stages of the import substitution era (1960s) and successfully adjusted their business in response to the government policies in Thailand. The BOI estimates that Thailand has over 2,300 part suppliers in comparison with Malaysia with 700 suppliers and Indonesia with 500 suppliers
Honda
35,143
4%
Isuzu
39,549
4%
Nissan
54,388
6%
auto alliance
114,056
13%
Toyota
334,124
37%
Mitsubishi
152,787
17%
Others
165,808
19%
Major Export Destination of Vehicles and Parts from Thailand in 2010
Indonesia
1927
10%
Malaysia
1246.1
7%
Saudi Arabia
1096.4
6%
Japan
1091.8
6%
Philippines
1080.4
6%
UK
494.4
3%
Other
8440.9
45%
Australia
3210.7
17%
6. Political factors affect
Political climate in a different country producing and buying automobiles regarding policies on import, export and manufacture of automobiles and automobile components. This will also include policies on allowing setting up of manufacturing plants by foreign companies.
Stability of governments. This may affect the future conditions in a country.
Taxation policies.
7. Economic factors affect
The population figures and automobile buying capacity of people.
Level of economic activity that affects need for commercial use of automobiles
8. Cultural factors affect
Lifestyle and preferences of people that impact their choice of types of automobiles.
Social norms that impact the decision to own and use automobiles versus other means of transport.
9. Technology factors affect
Technology relating to automobile designs
Technology of automobile manufacture
Technological developments that may increase or decrease use of automobiles. For example, Internet increase number of people working from home and thus reduces automobile use for commuting?
10. Environmental factors affect
Physical conditions effecting ability to use automobiles of different types. This will also include state infrastructure such as roads for driving vehicles.
11. Legal factors affect
Legal provision relating to environmental population by automobiles.
Legal provisions relating to safety measures.
Based on Kaosa-ard, M.S. (1993), government policies on the automotive industry from the 1960s to 1993 can be divided into four phases: "Initial Protection" (1962-1969), "Industrial Rationalization" (1972-1977), "Localization" (1978-1986), and "Transition toward Low Protected Industry" (1987-1993). The first policy phase was to stimulate the automotive industry via investment incentives from the Board of Investment. The policies in the second and third phases focused on building the local producers. During the last phase, government policy seemed to be in the role of supporting rather than protecting this industry. Along with the four phases of government policy, the development of the automotive industry seems to be quite successful, as can be seen in the automotive sector's significant increase in economic value and its large number of local producers. Today, Thailand is not only able to produce cars for the domestic market but is also one of the world's automotive exporters. Credit should be given more or less to past policy. In terms of quantity (the large number of local producers), it is impressive. However, in terms of quality (the performance of local producers), it is hard to say whether government policy has been successful. Based on the previous section, most of the local producers are in the 2nd and 3rd tier, with only a few in the 1st tier. It can be said that the past policy was able to accelerate only the number of local companies, with technology transferring still quite slow. Due to globalization and trade liberalization via several agreements within the international community, competition in the world market will grow even stronger. To survive, Thai producers must become sufficiently capable. Own innovation is what can make them capable. However, innovation needs a strong technology background. Therefore, the government has to ensure that new policies can strengthen local producers' capability by increasing the technology transfers from major automotive assemblers to the local producers. At the last stage, after absorbing enough technology, the local producers will be able to start their own innovation and they can survive in the competitive world.
Policy Recommendations
In the past, government policy aimed to support the automotive industry as a whole. It seems to have been successful, and after many decades the automotive sector has grown stronger. Many local producers participate on different levels as part of the automotive supply chain. As mentioned earlier, the policy of the government should focus more on increasing firms' capabilities. However, based on the surveys and the interviews in the previous section, local producers have different technological capability. This can be classified into four levels: Type A (Unaware/Passive), Type B (Reactive), Type C (Strategic), and Type D (Creative). Looking at the structure of the Thai automotive industry, Type D are those who are the assemblers, and Types C, B and A are those who are in the 1st, 2nd and 3rd tiers, respectively. Therefore, government policy should not be designed generally for the automotive industry as a whole but for meeting the needs of the different levels of firms, as follows.
Policy for Type D firms:
The policy for this group should motivate them for transferring technology. Establishing R&D units for high-technology automotive components of the Type D firms is an excellent starting point for technology transfers. However, besides a large amount of investment, establishing a high-tech R&D unit involves many more factors, including sufficient and capable human resources, intellectual property protection, and large local demand. Therefore, the government should assist Type D firms in the establishment of R&D units.
Policy for Type C firms:
The firms in this group have a good chance at gaining the most benefit from technology transfers. They have management people who are aware of the importance of technology, sufficient and capable human resources for absorbing the technology, and even some innovations of their own. Many of them can do well in process innovation as they know how to make the product and can develop efficient ways to improve their production, even though they have less product innovation. They do not know how to design the product to suit customer needs since they lack a high level of technology and do not understand customers very well. Therefore, government policy 267 for this group should aim to enhance their ability to create product innovations. Government policy should support them in setting up R&D budgets and R&D units for product innovation. This can be done via the strong incentive of tax reduction. Also, a stronger link should be developed between the national research centers, universities and the firms of Type C for developing product innovation.
Policy for Type A and B firms:
The strength of the firms in these groups is their large number of skilled workers who can do the precise design jobs. However, the limited number of engineers inhibits them from absorbing technology transfers. It may be difficult for them to pay very high salaries for recruiting more engineers. Therefore, government policy for these groups should help them to develop and enhance the capability of their own people. The government may provide grants for universities or private organizations to set up technology incubator centers for developing the technological capability of workers in the automotive industry, especially for the firms in the 2nd and 3rd tiers (or Type A and B firms). Finally, in short summary, the proposed policy is for the government to tailor-make policies that support the different types of firms in the automotive industry. This should create linkage between technology transfers and more self-innovation by the local firms. [2]
12. Import and Export restriction of Govt. for Automobile Industry
There is no restriction in automobile industry.
13. Present position and trend of business with Gujarat/ India during last 5 years
14. Trade norms of Indian Govt. for Automobile Industry
Thailand has Free Trade Agreements (FTAs) all serve to facilitate and promote Thailand's role as Asia's automotive hub. Thailand enjoys a tax exemption for automotive parts through the ASEAN Free Trade Area (AFTA) agreement. Free trade agreements with Australia, New Zealand, China (another 1.3 billion consumers), and India also have created market opportunities for Thailand.
15. Trade barriers for Automobile Industry
Tariffs:
Motor Vehicles:
• Pick-ups are assessed a 40 percent import duty.
• Passenger cars are assessed an 80 percent import duty.
• Heavy-duty trucks and buses are assessed a 40 percent import duty.
Automotive Parts and Components:
• CKD kits (passenger cars, pickups and sport utility vehicles) are assessed a 30percent import duty.
• Vehicle components which are not brought in as CKD material (i.e. service
parts/missing/damaged parts) are subject to 0- 30 percent duties
• The tariff on raw materials ranges from 0-10 percent.
Taxes:
• The excise tax is computed under the following formula:
Vehicle Price (including tariff) x Excise Tax Rate
1 - (1.1 Excise Tax Rate)
• The municipal tax is 10 percent of the amount of the excise tax.
• The VAT is 7 percent times the price including tariff, excise tax and municipal tax
16. Potential for Import/ Export in India/ Gujarat market
Tata motors introduce NANO car replace of eco car in Thailand. Tata motors have plans to introduce the Nano in future for economic segment for the market and probably plan to expand it by taking to the neighboring countries in the Asian. "Tata motors had received a Thai government approval for setting up a Greenfield manufacturing facility to produce eco cars at a reported investment of 7 billion baht. Tata motors Thailand currently rolls out the xenon luxury pick-up truck and is targeting to capture 5 per cent of the pickup vehicle market by 2014 in that country. The company has set up a plant in Bangkok for producing the with an annual capacity of 20,000 units.
17. Presence Gap in existing market
Despite of success of TSG, there are certain components parts that Thailand is lacking or is uncompetitive. The Government, especially BOI is aware of this gap and has indicated that Thailand will attract more players specifically in moulds and dies, fuel injection pumps, transmissions, injection nozzles, anti-lock braking system and central locking systems, among numerous products. More R&D, designs and testing centers are also needed.
Thailand is also lacking of low skilled labor force, it faces an acute shortage of highly skilled automotive engineers. So Thailand is hiring more expensive foreign skilled workers from neighboring countries like Malaysia and Indonesia, increasing their labor cost.
The gap between output and employment shares reflects the relatively high capital intensity of automobile industry compared to the average level of total manufacturing.
18. Business opportunity in Future
Thailand produced 1.65 million vehicles last year - 55% were slated for domestic sales and 45% for export. Thailand's auto industry is targeting production of 3 million vehicles annually by 2015, pushing the country into the top 10 from its present 12th ranking.
19. Conclusion
Automobile manufacturing has traditionally played an important role in stimulating economic growth and development. Sustaining and increasing export production levels of autos and auto components remains pertinent for the potential growth of these industries. Automobile industry should be given to ways of increasing the size of domestic markets by implementing strategic regional trade agreements, making vehicles more affordable to average persons and at the same time increasing domestic production and employment levels in the industry. Greater investment inflows and enhancing support for technological innovation and R&D activities in the auto industry in the future are also essential.
The automobile policy helped Thailand to become major automobile hub in Asia. The policy has helped countries to move from assembling stage to production stage. Mainly driven by Japanese FDI, the facilities have been used by MNCs to export vehicles and components to other countries. Most of the global automobile giants are present in Thailand along with their legions of suppliers. Regional trade liberalization through AFTA is fuelling the export growth of Thailand. Trade agreements with Australia, India and discussions in APEC forums are also acting as key elements to increase the regional trade of automotive sector and Thailand is playing a significant role. Thailand is clearly specializing in full vehicles.
Thailand's automotive industry helps to develop and strengthen Thailand
For more than 50 years, the Thai automotive industry has provided economic, technological, social and environmental benefits for the country.
Economic benefits: The value created by the Thai automotive industry accounts for 10% of Thailand's GDP. Thailand is the world's 6th largest exchange earner in automobiles and auto parts and will be among the world's top 10 automotive production bases, given its 2012 production output. Accumulated automobile exports for 2012 are anticipated to more than one million units with total value of more than one trillion baht, comprised of automobile exports of 600 billion baht and auto part exports of 400 billion baht. The Thai automotive industry is the largest sector in terms of generating foreign income for the country and has developed a large and solid base of related local industries. Currently, Thailand has more than 2,500 manufacturing plants for vehicles, auto parts suppliers and related industries. So far during 2012, there have been applications for promotional privileges in the automotive segment, with a total value of 202,800 million baht, up 95% from last year.
Technological benefits: Technology is a key factor in the development of Thailand's automotive sector. Automotive and auto parts manufacturers have established nine research & development centers in Thailand, which has led to the increasing transfer of production and industrial management expertise. The Thai automotive industry has successfully raised production standards for its made-in-Thailand brands to meet leading international quality certifications and levels.
Social and environmental benefits: The Thai automotive industry has played a major role in enhancing the quality of people's lives by creating employment and improving the skills that are the heart of the production process. The industry has made a major contribution to the development of transportation in Thailand and has spread prosperity to many communities. On the environmental side, the automotive industry is taking the lead in promoting the awareness of environmental protection. Automobiles and auto parts are produced to meet international Euro and emissions standards. Other highlights include the development of environmentally-friendly technologies and social initiatives that have been implemented on a continual basis to protect communities and the environment.
To celebrate the milestone, a major celebration event called "The Thai Auto 2 Million Celebration: The New Dimension Drives The World" will take place on November 30, 2012 at the Royal Jubilee Ballroom, Challenger Building, Muang Thong Thani. Prime Minister Yingluck Shinawatra will chair the event and deliver a keynote address. The Thai public can learn more about the Thai automotive industry's potential at a striking exhibition featuring the 50-year history of the industry and its next step into the global arena. The exhibition will be at the 29th Thailand International Motor Expo in front of the Challenger Hall, Muang Thong Thani, between November 29 and December 10, 2012.
Thailand has a well-established transport infrastructure that enables high-density vehicles on its roads. For The World Economic Forum's Global Competitiveness Report 2010-2011, Thailand was ranked 36th with a score of 5.1 over 7 on Quality of Roads, ahead of China (56th) and Indonesia (84th). Where roads were not so developed, 1-ton pick-up trucks are the more popular choice.
While Thailand has an adequate low skilled labor force, it faces an acute shortage of highly skilled automotive engineers. There are also a limited number of higher education programs and courses available from local universities in Thailand whilst there are sufficient vocational training courses provided by vocational training schools in the greater Bangkok area It is expected in 2010 that there would be a critical shortage of 10,300 automotive engineers while the educational institutes will only meet this shortage with 3,360 graduates, as illustrated in Figure 18 (Federation of Thai Industries, 2009). There will still be a shortfall of 6,940 automotive engineers to meet industry needs in Thailand. This shortfall is further exuberated by the long lead-time taken to fill a skilled production worker. This has resulted in a lack of capable skilled manpower in Thailand in recent years - we anticipate this gap to further widen in the near future and automotive companies will have to hire more expensive foreign skilled workers from neighboring countries like Malaysia and Indonesia, increasing their labor cost.
There is also a lack of innovation capacity in the automotive cluster in Thailand due to the lack of knowledgeable and trained personnel as illustrated in Figure 19. 42.7% of the companies cited this as their primary reason while 43.6% cited high cost of financing for innovative activities as another factor (World Bank, 2007).
