2009 03 eco car policy in thailand impact on the global car market frost & sullivan

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“We Accelerate Growth”

Eco Car Policy in Thailand: Impact on the Global Car Market

March 2009

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Agenda

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5

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1 Thailand Automotive Market

Eco Car Project in Thailand

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Impact on Global Car Market

Outlook of Eco Car Project

Conclusions and Way forward

Next Steps

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Source and Analysis: Frost & Sullivan

Thailand, traditionally dominated by one ton pick-up trucks, sees sharp growth of passenger car sales in 2008

2007 20082006

TIV: 631,251TIV: 631,251TIV: 631,251

TIV: 615,270TIV: 615,270TIV: 615,270

TIV: 682,161TIV: 682,161TIV: 682,161 -7.5%

-2.5%

• Thai automotive market shrank due to domestic

political turmoil and global economic crisis

• Down by 2.5% over 2007 with volume of 615,270

• Domestic pick-up truck sales are dwindling

• % contribution of pick-up trucks has dropped

from 66% in 2006 to 54% in 2008, have lost a

volume of over 115,000 units

• Passenger car sales are growing sharply, have

added a volume of about 35,000 units and their

contribution has grown from 28% to 37%

Eco Car: Total Industry Volume (Thailand), 2006 - 2008Eco Car: Total Industry Volume (Thailand), 2006 - 2008

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Context of Eco Car Program

• Thailand has become a production hub by crossing 1 million mark

with this “product champion”

• Their ambition is to cross 2 million mark by 2012

• Demand for pick-up truck may not help them to achieve this level of

production

• Therefore, Thailand is looking for another “Product champion” that

would help them to meet the target

• Therefore, Eco car concept was conceived by Thailand

• Objective of Eco car program is help achieve Thailand 2 million

units of production by 2012

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Agenda

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5

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1 Overview of Thailand Automotive Market


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Next Steps

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What is eco car?

Energy Consumption • Gasoline/Diesel <= 5L per 100 km

Environment Friendly • CO2 <= 120g per 100 km

• Euro 4 and higher

Safety Standard • UNECE 94 & 95 safety standard

• Eco car is an idea conceived in 2007 to reduce energy consumption, preserve the environment and lessen

dependence on imported oil.

• Eco car parameters are in line with the growing consumer demand for safer, more fuel efficient and

environmentally friendly modes of transportation, without sacrificing in the areas of comfort and safety

• Eco car is an idea conceived in 2007 to reduce energy consumption, preserve the environment and lessen

dependence on imported oil.

• Eco car parameters are in line with the growing consumer demand for safer, more fuel efficient and

environmentally friendly modes of transportation, without sacrificing in the areas of comfort and safety

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A Category

• Meets all requirements of eco car

• 350K to 450K baht (9.8K to 12.7K USD*)

B Category

• Higher level of technology

• 500K to 600K baht (14.1K to 16.9K USD*)

C Category

• Hybrid electric eco car

• Very highly priced i.e. Above 750K baht (Above 21.1K USD*)

Classification of Eco Car

*Price levels are not specified in Eco car program. Price ranges are indicative only

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What are the attractions and conditions stipulated on the vehicle manufacturers?

8 years Exemption on

machinery duty import and

corporate income tax

8 years Exemption on

machinery duty import and

corporate income tax

17% tax (<1,300cc petrol car,

<1,400cc diesel car) - leads to

lower prices of Eco car

(~USD2k cheaper )

17% tax (<1,300cc petrol car,

<1,400cc diesel car) - leads to

lower prices of Eco car

(~USD2k cheaper )

Up to 90% reduction

of import duties

on raw materials and

parts, depending on type of

product

Up to 90% reduction

of import duties

on raw materials and

parts, depending on type of

product

BenefitsBenefits

ConditionsConditions

• Production of 100K units on the 5th year with a minimum investment of 5 billion baht - car assembly,

engine manufacturing and component - excluding cost of land and working capital

• Should meet requirements of Eco car: Energy, Emission and Safety

• Manufacture at least 4 out of following 5 key engine parts namely Cylinder Head, Cylinder Block,

Crankshaft, Camshaft and Connecting Rod, and the process of machining Cylinder Head, Cylinder

Block and Crankshaft must be included in the project

• Production of 100K units on the 5th year with a minimum investment of 5 billion baht - car assembly,

engine manufacturing and component - excluding cost of land and working capital

• Should meet requirements of Eco car: Energy, Emission and Safety

• Manufacture at least 4 out of following 5 key engine parts namely Cylinder Head, Cylinder Block,

Crankshaft, Camshaft and Connecting Rod, and the process of machining Cylinder Head, Cylinder

Block and Crankshaft must be included in the project

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OEMs involved in Eco Car Project: Eligible companies must manufacture no fewer than 100,000 units per annum from the fifth year

OEM

Capacity

/Year (Unit)

Investment

(Billion THB)

Probable Eco

Models

Models Planned

that Have Already Gained Approval

Target Market

120,000

• 6.2

• By Honda

Automobile

Thailand

• 1.3-L gasoline sedan

based on global

WOW concept small

car

• 2-3 models on same

platform

• Honda Jazz, but with 3

cylinder 1.2 litre engine• 50% domestic

• 50% export to

ASEAN, Asia and

Europe

107,000

• 4.71

• By MMC

Japan

• 1.3-L gasoline sedan

• 2-3 models on same

platform

• Mitsubishi Concept X

1.3L or a 660cc version• 12% domestic

• 88% export to

ASEAN, Asia and

Europe

Eco Car: Eco Car Project (Thailand), 2009Eco Car: Eco Car Project (Thailand), 2009

Honda

Mitsubishi

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OEMs involved in Eco Car Project: 2/3

OEMCapacity

/Year

(Unit)

Investment (Billion

THB)

Probable Eco

Models

Models Planned that Have Already

Gained Approval

Target Market

100,000

• 4.64

• By Toyota

Motor

Thailand

• 1.1-1.3-L gasoline

sedan

• Rebadged MyVi,

followed by second

generation Boon

Passo

• MyVi or a new global

A segment car

developed by TMT

• Toyota Passo 1.2 or

1.3 diesel - gearbox

from India • 50% domestic

• 50% export to

ASEAN, Asia and

possibly Europe

100,000• 7.4

• By Tata India

• 1.0-1.3-L gasoline &

1,3-L diesel Tata X4

Sedan

• At least two models

on same platform

• Tata Nano 3 cylinder

623cc• 42% domestic

• 58% export to

ASEAN, Asia &

South Africa

Toyota

Tata

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OEMs involved in Eco Car Project: 3/3

OEM

Capacity

/Year (Unit)

Investment

(Billion THB)

Probable Eco

Models

Models Planned

that Have Already Gained Approval

Target Market

120,000

• 5.5

• By Nissan

Japan

• 1.1-1.3L gasoline

sedan

• Probably next

generation

Mirca/March

• At least two models

on same platform

• Nissan Micra 1 liter 3-

cylinder Xtronic CVT • 10%-15%

domestics

• 85%-90% export to

ASEAN, Asia and

Australia

138,000

• 9.7

• By Suzuki

Japan

• 1.1-1.3L gasoline

sedan cooperation

with GM

• New global small car

on splash platform

will be Eco car, or

next generation

Wagon R

• Suzuki Cervo 3

cylinder 660 cc • 10%-15%

domestics

• 85%-90% export to

ASEAN, Asia and

Australia

Nissan

Suzuki

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Agenda

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Next Steps

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Eco car production is expected to gradually reach the 700K mark by 2015

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2009 2015

Eco Car: Production Forecasts of Eco car vehicles (Thailand), 2009-2015

Year

Ve

hic

le P

rod

ucti

on

40K in 2009

700K in 2015

• This is based on the production target of vehicle manufacturers and the foreseeable market condition:

domestic and export

• Honda to commence production in 2010

• Most automakers to start in 2011 hence by 2015 many would be able to achieve full production to

bring total to 700K

• This is based on the production target of vehicle manufacturers and the foreseeable market condition:

domestic and export

• Honda to commence production in 2010

• Most automakers to start in 2011 hence by 2015 many would be able to achieve full production to

bring total to 700K

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Key Drivers & Restraints for Eco Car ProductionD

rivers

Restra

ints

Impact

Uncertainly over oil prices

Demand for fuel efficient

cars in Thailand and in the region

Frequent political turmoil

and unrest undermines confidence

New model launches to boost sales

of passenger cars

Export market potential (about

70% of total production)

Economic downturn

would take toll on consumer confidence,

credit availability

Source: Frost & Sullivan

Price pressure from small

cars imported from Malaysia

Markets that are potentially lucrative like Indonesia is quite averse

on the idea of accepting eco cars as CBU

A number of FTAs(India, Australia,

Korea & Japan) in place would benefit

Thailand eco car project

Eco Car: Key Drivers & Restraints (Thailand), 2009-2015Eco Car: Key Drivers & Restraints (Thailand), 2009-2015

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Agenda

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Next Steps

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The global automotive market is expected to contract at a CAGR of more than -4% between 2007 and 2010

Units (Million)

Note: CAGR calculated for 2007 to 2013; All figures are rounded; the base year is 2007. Source: Frost & Sullivan

63.8 millionCAGR: –4.1%

0.49m 0.54m0.43m

0.53m

56.2 million

2007 2010

2.4m 2.7m

Brazil

1.7m2.1m

India

7.9m6.3m

China

Global Sales Volumes of Light Vehicles, 2008

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CO2 Legislation

Current Global Business Environment Poses Huge Challenges with Opportunities along-side

Opportunities and Threats in Global Automotive Market, 2008

Global Credit

Crunch

Falling Consumer

Confidence

Rapidly Declining Vehicle

Sales in Q3 2008 and a

weak outlook for 2009

Fluctuation in

Commodity prices

Falling Company

Valuations and Earnings

Reduced Consumer

Consumption &

Expenditure

Cut in Production

Capacity and

Workforce

Demand for Green

Technologies, Electric

Vehicles and Hybrid

Powertrain

Increase in Demand

for Small, Low-cost

and Fuel-efficient cars

Higher tax burden on

cars with higher

emissions

Sustained Increasing

demand in Emerging

Markets

Opportunities

Threats


Unstable Business

Environment

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Basic Small Low Medium

High Medium Large Low Luxury

High Luxury Super Luxury MPV

SUV Pickup / Truck Sports, Van & Others

Global Sales Volumes of Light Vehicles – by Vehicle Segment, 2008

*(India, China, Thailand, Malaysia,

Indonesia, Korea)

Europe (including Russia)

41%

18.9m

10% Vans

6.7%

18.8%

22.4%

10.1%

11.9%

9.6%

USA

13.2m

42%

4.0%

13.9%

4.5%

14.8%

6.5%

26.9%

15.1%

6.0%

• Basic and small cars have a

strong sales trend in Europe

and Asia at present making

one fourth of the market size

• USA to witness a strong

growth of Small cars and

super-minis in 2009 and 10

• Pickup sales expected to reach

close to 1m units, while SUVs

are expected to sell 1.3m

units in Asia by 2010

• Asia and Europe are big

markets for commercial Vans,

while Japan has Vans in the

passenger segment too

Asia*

13.5m

49%

13% Vans

11.6%

12.5%

25.0%

11.3%

7.1%

9.2%

7.0%

Japan

5.0m

30%

16.1%

7.8%

9.6%

6.8%

6.6%

10.6%

9.9%9% Vans

Small, affordable and clean cars are mega trend in the auto industry in the next 5 years: Eco car likely to be biggest gainer


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Russia

India

Brazil

USA

China

Europe

Others

Legislation (Emission) and Environmental Impact on Global Automotive Industry (Passenger Cars),

2008

Lowering green house gas (CO2) emission and reducing energy

dependency are the drivers: Eco car fit in well in this trend as well

2005 2008 2010 2012 2015

Electric vehicles in Israel

Bharat IV (equivalent to Euro IV)Bharat III Stds. in India (equivalent to Euro III)

Euro IVEuro II Euro III Euro V

Euro IV rolled out

first in Top 10

Indian Cities and

later nationwide

Euro IV

Euro IV introduced

in Beijing in 2008

Electric vehicles & Plug-in Hybrids in US

Euro IV

Electric vehicles for low CO2 emissions

CO2 based taxes in Germany, UK, Benelux

Euro V Euro VI

Euro II National Std III (Euro III)

PROCONVE L-5 (Euro IV)Euro II PROCONVE L-4 (Euro III)

Bio fuels with 25% ethanol mix in BrazilBio fuels(20–25% ethanol)

Tier 2 Emission Standards Euro V Euro VI

CAFE startin MY 2011, 35mpg by MY 2020

Emission Standards Reducing energy dependencyEmission-based TaxationKey Driver

Note: * CAFE - Corporate Average Fuel Economy Source: Frost & Sullivan

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Eco Car has a huge potential in Europe, US and Asia

Eco Car can potentially target volume of 11.23 million

43% of the addressable volume is in Europe

• Eco car program has a huge potential. It can target a volume of 11.23M in key markets such as

Europe, US and Asia

• Bulk of the volume lies in Europe. 4.8M cars which constitute to 43% of the addressable markets

followed by Asia

• This indicates that Eco car is a product with huge potential, which can potentially be Thailand’s next

product champion after pick-up trucks

• Eco car program has a huge potential. It can target a volume of 11.23M in key markets such as

Europe, US and Asia

• Bulk of the volume lies in Europe. 4.8M cars which constitute to 43% of the addressable markets

followed by Asia

• This indicates that Eco car is a product with huge potential, which can potentially be Thailand’s next

product champion after pick-up trucks

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Eco car would predominantly be a exported to Europe and Asia, particularly Australia and ASEAN

Eco-Cars

(700k)

Domestic Market (10%)CKD Export (20%)CBU Export (70%)

• Model variants of similar platform

acceptable

• But as per specifications and

requirements of Eco car regardless

of destinations

• Meets stringent EU standards

• CKD parts have to be the key

engine components

manufactured in Thailand

specifically for eco car.

• 40% local or ASEAN content in

order to export to ASEAN under

AFTA

• ASEAN country like Indonesia

may choose this to support local

industries

• Fuel efficient

• Environment friendly

• First time buyers likely to be

attracted

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Europe• The Eco-car specification is

designed to meet the European requirements

• Significant volume will still be produced in Europe to satisfy the diesel vehicle demands

Impact will be Global

Australia • Australia would be one of the initial

export target for Thailand’s eco-car• Eco-car could dominate the

Australian vehicle landscape

ASEAN• Malaysia is currently the largest passenger car

market in ASEAN, however its AP license restrict the potential sales volume in Malaysia

• The focus would be on emerging economy like Vietnam and Philippine where local production is making limited progress

North America• The eco-car would replace much of

the US small car import from Japan• The challenge would be to meet the

regulatory requirements for passive safety systems

Eco Car: Impact on Automotive Market (world), 2009-2015Eco Car: Impact on Automotive Market (world), 2009-2015

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Issues with Eco Car Program: Opportunity for non-Eco Car Players in Thai Market

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Agenda

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Next Steps

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Conclusions

Thailand Eco car policy is likely to help them achieve their ambThailand Eco car policy is likely to help them achieve their ambition to reach 2mn vehicle production, ition to reach 2mn vehicle production,

although there would be some delay in achieving these numbers dualthough there would be some delay in achieving these numbers due to current slow downe to current slow down

Current global trends support fundamental premise of Eco car: SmCurrent global trends support fundamental premise of Eco car: Small, fuel efficient, environment friendly all, fuel efficient, environment friendly

, safe car, safe car

Europe, Australia and ASEAN would be key export markets for Eco Europe, Australia and ASEAN would be key export markets for Eco car programcar program

Although there are some aspects of Eco car program that would giAlthough there are some aspects of Eco car program that would give a window of opportunity for nonve a window of opportunity for non--

eco car players in Thai market in short termeco car players in Thai market in short term

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Agenda

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Next Steps

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Next Steps

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(email [email protected])

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2009 03 eco car policy in thailand impact on the global car market frost & sullivan

Documents

eco car concept

eco car policy

outlook of eco car project

global car market

units passenger car

total industry volume

thai automotive market

units of production