Updated Information on Trade and Investment Opportunities in Thailand:

Automotive Industry Part 2

Ms.Nattinee NetraumpaiMs.Nattinee NetraumpaiAssistant DirectorAssistant Director

Thailand Board of Investment, Frankfurt OfficeThailand Board of Investment, Frankfurt Office

Investment Opportunities for Automotive and Supplier

Industries

USA

Imports: 330,663

Exports: 662,741

China

Imports: 564,591

Exports: 510,756

ASEAN

Imports: 872,365

Exports: 1,119,956

EU

Imports: 403,243

Exports:672,824

Japan

Imports: 988,536

Exports: 625,061

Australia

Imports: 132,191

Exports: 197,516

Hong Kong

Imports: 50,147

Exports: 298,955

Korea

Imports: 184,223

Exports: 102,298

Major Trade Partners in 2007unit: million Baht

Source: MOC

Thailand’s FTA

Thailand-Japan FTA (under implementation)

JAPAN : 128 million population

ASEAN-Japan FTA

KOREA: 48 million population

ASEAN-Korea FTA ( Under Negotiation)

ASEAN: 550 million

population AFTA

NEW ZEALAND : 4 million population

ASEAN-New Zealand FTA(Under Negotiation)

AUSTRALIA : 20 million population

ASEAN-Australia FTA(Under Negotiation)

INDIA : 1.1 billion population

ASEAN-India FTA(Under Negotiation)

CHINA: 1.3 billion population

ASEAN-China FTA (Under Negotiation)

ASEAN-EU FTA(Under Negotiation)

Thailand-India FTA (Under negotiation)

PERU: 28 million population

Thailand-Peru FTA (under implementation)

Thailand – Australia FTA TAFTA (implemented)

Bilateral

Thailand – NZ FTA (implemented)

Thailand-EFTA: 13.5 million population

(Norway, Iceland, Switzerland

and Liechtenstein). (Under Negotiation)

BIMSTEC: 1.4 billion population (India, Burma, Sri Lanka ,Thailand, Nepal,

Bhutan, Bangladesh) (Under Negotiation)

US : 300 million population

Thailand-USA FTA (Under Negotiation)

Multilateral

Effective Date:Thailand-China: October 2003 ASEAN-Australia-NZ: Will be implemented in late 2008Thailand-India: Early harvest Sept 1, 2004 ASEAN-EU: Negotiations began in 2003Thialand-India FTA: Late 2008 early 2009 will be implemented ASEAN-Korea: Aug 2006Thailand-Japan: April 3, 2007 ASEAN-India: Will be signed in Dec; put into

effect in early 2009Thailand-Korea: Concluded negotiations in Jan 2008 ASEAN-Japan: Implemented late 2008Thailand-Peru: Implemented in Nov 2008 ASEAN-China: July 1,2005Thailand-US: Negotiations began in 2003 AFTA: July 1, 2003Thailand-EFTA: Negotiations began in May 2005 TAFTA: Jan 1, 2005Thailand-NZ: July 1, 2005BIMSTEC: Negotiations on goods concluded in 2005 for implementation in 2006 Negotiations on service: investment; concluded in 2007

Cambodia

Imports: 1,689

Exports: 46,718

Laos

Imports: 16,296

Exports: 45,208

Philippines

Imports: 74,630

Exports: 99,965

Indonesia

Imports: 138,551

Exports: 164,228Brunei

Imports: 3,900

Exports: 3,134

Singapore

Imports: 218,708

Exports: 328,169

Malaysia

Imports: 299,903

Exports: 268,614

Myanmar

Imports: 80,031

Exports: 33,064

Vietnam

Imports: 38,655

Exports: 130,856

Source: MOC

Thailand – ASEAN Trade in 2007unit: million Baht

Thailand-ASEAN Trade

0

300

600

900

1,200

1,500

Bil

lio

n b

ah

t

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(Jan-Apr)

Imports Exports

Source: Bank of Thailand, as of June 25, 2008

ASEAN Economies as a Potential Single MarketCountry Popul

ation

(million)

GDP current price

(billion US$)

GDP per

Capita (US$)

GDP Grow

th (%)

Total Trade

(billion US$)

Indonesia

222.05 5.6 1,640 5.6 161.86

Malaysia 26.69 5.9 5,880 5.9 285.54

The Philippines

86.91 5.3 1,351 5.3 99.18

Singapore

4.84 7.9 29,499 7.9 510.09

Thailand 65.23 5.0 3,167 5.0 248.69

Vietnam 84.20 8.2 724 8.2 77.27

ASEAN 567.56

6.0 1,890 6.0 1,404.81

Pure Thai

23 %

SMEs

Foreign J/V

Foreign

Majority

47 %.

LocalSuppliers

Tier 1

LSEs(Total 648

Companies)

Thai Majorit

y30 %

[* LSEs : Large Scale Enterprises SMEs : Small & Medium Enterprises]

The data updated in January 2005 by TAI

(Car 16 Companies, Motorcycle 7 Companies)

(1,641 Companie

s)

Tier 2,3

Assembler

Structure of Thai Automotive Industry

MAPPING OF AUTO-ASSEMBLERS

Ayudhaya- Honda Automobile (Thailand)

Bangkok-Thai Honda Manufacturing (MC)

Cholburi- Mitsubishi Motors Thailand

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)

Rayong- Auto Alliance (Thailand)- General Motors (Thailand)- BMW Manufacturing (Thailand)- Kawasaki Motors Enterprise (Thailand) (MC)

Chachoengsao-Toyota Motor Thailand (2 Plants)-Triumph Motorcycle (MC)

98% Exported at

Laem Chabang Port-LCP

Source: Port Authority Thailand, Dr.Siri Jirapongphan

Automotive Assemblers in Thailand

PRINCIPAL AUTO PARTS PRODUCTION SITESPathumthani

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%

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%

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%

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%

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%

• EnginesDiesels, Motorcycles

• Engine ComponentsStarters, Alternators, Pumps, Filters, Hoses, Gears, Flywheels

• Body PartsChassis, Bumpers, Fenders, Hoods, Door Panels

• Brake SystemsMaster Cylinders, Drums, Discs, Pads, Linings,

• Steering SystemsSteering Wheels, Gears, Columns, Pumps, Linkages

• SuspensionsShocks, Coils, Ball Joints

• TransmissionsGears, Casings, Rear Axles, Drive Shafts, Propellor Shafts

• Electrical/ElectronicsAlternators, Starters, Speedometers, Lamps, Motors, Flasher Relays

• Interiors/ExteriorsSeats, Mats, Weather Strips, Console Boxes

• OthersWindshields, Seat Belts, Radiators, Wheels, Compressors

Parts Manufactured in Thailand

Major Steel Makers in Thailand

• Sahaviriya Steel • Siam Steel• Nippon Steel• JFE Steel• ArcelorMittal Steel• Baosteel• TATA Steel

Current Demand in Automotive Industry

Passenger Car EnginesFuel Injection Pumps*Transmissions*Differential Gears Injection Nozzles*Electronic SystemsElectronic Control UnitsTurbo Chargers*Substrates for Catalytic convertersAnti-Lock Brake SystemsNGV Equipment target: 99,000 NGVs by 2008

Opportunities: Opportunities: Components not Components not Sufficiently Produced in ThailandSufficiently Produced in Thailand

Business Opportunities for Automotive Electronics

World OEM Automotive Electronics Demand

* Estimated.Source: The Freedonia Group.

2001 2006 2011* % Annual Growth

2001-2006 2006-2011*

North America 22.9 30.1 41.2 5.6 6.5

Western Europe 23 28.8 36.3 4.6 4.8

Asia-Pacific 19.8 36.3 55.4 12.9 8.8

Others 4.4 11.2 29 20.8 12.3

Global demand 70 106.3 152.8 8.7 7.5

Asia-Pacific OEM automotive electronics demand, 1996-2016*

* EstimatedSource: The Freedonia Group.

Distribution of Thailand’s Tier-1 Automotive Suppliers

Company Type Chassis

Powertrain Electrical/Electronic

Body

Others

Pure Thai 5 12 4 14 41

Majority Thai 10 11 12 10 29

Majority Foreign 33 31 9 31 50

Wholly Foreign-Owned 17 18 7 12 25

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.

Item 1996 2001 2006 2011 2016

*** ***

Value of electronics used per vehicle* 435 630 1,009 1,288 1,716

OEM auto electronics demand** 196 258 1,150 2,183 3,500

- Engines and drivetrains 100 133 500 1,000 1,542

- Safety and security products 42 50 292 542 917

- Comfort, convenience and entertainment products

29 42 233 417 667

- Navigation and instrumentation 25 33 125 225 375

- Percentage of products sold to Thai conumers 1 1 3 4 4

Asia Pacific OEM auto electronics demand** 12,796 16,500 30,208 46,125 66,750

Thailand’s Automotive Electronics Technology Road Map

Source: Thailand Embedded Systems Association.

Thailand’s Automotive Electronics: Strengths

• 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

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.

BOI Incentives and Outsourcing Services

• 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)

Liberal Investment Regime

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

Basic BOI Incentives

BOI Basic BOI Basic Promotion Promotion PackagesPackages

BOI Basic BOI Basic Promotion Promotion PackagesPackages

3 Investment Promotion Zones to promote industrial decentralization

Zone: 1 2 3Incentives: 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

• 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.

Thailand is a very attractive location for R&D, product development and marketing activities for emerging markets.

Source: Thailand Automotive InstituteSource: Thailand Automotive Institute

Incentives: Automotive Industry Cluster (Assemblers & Suppliers)

ConditionsConditions Total investment over 10 billion baht Total investment over 10 billion baht (including component parts manufacturing)(including component parts manufacturing) Covers: Covers:

Automotive AssemblingAutomotive Assembling Manufacture of Vehicle Parts and EnginesManufacture of Vehicle Parts and Engines

Total Investment at least THB 10 BillionTotal Investment at least THB 10 Billion

IncentivesIncentives Import Duties on Machinery Exemption, regardless of zoneImport Duties on Machinery Exemption, regardless of zone Corporate Income Tax Exemption by zoneCorporate Income Tax Exemption by zone

Passenger Car Assembly Incentives

ConditionsConditions– 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

IncentivesIncentives– 5- year corporate income tax holiday in any zone– Projects in Zone 1, 2 or 3 receive import duty exemption on

machinery

• 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: General Car Assemblers

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

Zone 3Zone 2Zone 1

Examples: Electronic Fuel Injection Systems, ABS Brake Systems, Substrates for Catalytic Converters, NGV Parts, Molds/Dies

Exempt from corporate income tax for 8 years

Exempt from machinery import duties

Machinery Duty: 50% reductionCorporate Income tax exemption:

In IE - 3 years

High-Tech

Machinery Duty: ExemptCorporate Incometax exemption:

exempt 8 years

Machinery Duty: 50% reductionCorporate Incometax exemption: In IE - 7 years Outside IE - 3 years

General

Investment Incentives

for Automotive Component & Part Manufacturing

% of First Three Years’ Sales Add. Income Tax Exemption, No cap

1% or at least 150 million baht 1 year

2% or at least 300 million baht 2 years

3% or at least 450 million baht 3 years

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.

Additional incentives for skills, technology, and innovation (Optional)

Internationally-acclaimed support

services:

Overseas offices

Country desks

1-Stop for visas & work permits:work permits in 3 hours

Interaction with other govt. agencies on behalf of investors

Industrial Subcontracting Vendors Meet Customers Program

(BUILD Unit)

Investment Matchmaker Program

ASEAN Supporting Industry Database (ASID)

Dedicated to creating an enabling environment

for investment

BUILD ActivitiesBUILD 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

THAITHAILANDLAND OF INVESTMENTOF INVESTMENT

The perfect opportunity

Thailand—Each Piece Fits Perfectly.

www. boi.go.th