INVESTMENT OPPORTUNITIES IN THAILAND: AUTOMOTIVES Thailand Board - - PowerPoint PPT Presentation

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Thailand Board of Investment

• Mr. Vittaya Praisuwan

Executive Investment Advisor September 2006

INVESTMENT OPPORTUNITIES IN THAILAND: AUTOMOTIVES

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• Detroit of Asia & investment
• pportunities
• BOI incentives for auto investments

Thailand: Geared for Excellence

Building the Automotive Hub of Asia

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Investment Opportunities Investment Opportunities in the Detroit of Asia in the Detroit of Asia

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Thailand Auto Facts Thailand Auto Facts

• Auto sector: 12% of GDP
• World’s 2nd largest

consumer, producer of pickup trucks (after U.S.)

• Largest auto producer in

Southeast Asia, expanding at a rate of 24% in 2004

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Auto Exports & Imports 2004 Auto Exports & Imports 2004

Top 10 Exports Top 10 Exports

Value Value US US Mil.

Mil.

1 1 Computers & components 8,855 8,855 2 2 Autos & parts 5,408 5,408 3 3 Integrated circuits 4,735 4,735 4 4 Rubber 3,267 3,267 5 5 Radios, TVs 3,074 3,074 6 6 Plastic pellets 2,982 2,982 7 7 Garments 2,944 2,944 8 8 Rice 2,565 2,565 9 9 Gems and jewelry 2,520 2,520 10 10 Iron and steel 2,396 2,396 2,704 2,704

Auto Parts & Accessories

10 10 2,840 2,840

Jewelry, Silver Bars, Gold

9 9 3,268 3,268 Metal Manufactures 8 8 4,619 4,619 Computers, Parts,

Accessories

7 7 5,550 5,550 Iron and Steel 6 6 7,004 7,004 Integrated Circuits 5 5 7,731 7,731 Chemicals 4 4 9,001 9,001 Industrial Machinery 3 3 9,041 9,041

• Elect. Machinery, Parts

2 2 10,214 10,214 Crude Oil 1 1 Value Value US US Mil.

Mil.

Top 10 Imports

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Automotive Industry in Thailand Automotive Industry in Thailand

1,125

158 559 525 434 389 584 459 411 327 928 750

703

262 218 296 363 589 485 571 144 409 626 533

440

130 152 175 180 233 332 200,000 400,000 600,000 800,000 1,000,000 1,200,000 21 8 14 66 42 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Production Domestic Export

Thousand Units

• Ave. Growth 35% per year
• Ave. Growth 35% per year

(1998 (1998 – – 2005) 2005)

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Production Capacity in 2004 / 2005 Production Capacity in 2004 / 2005 10,000

• 10,000

12.VOLVO 170,000 20,000 150,000

• 3.ISUZU

135,000

• 132,300

2,700

• 4. AUTO ALLIANCE

(Ford& Mazda) 334,000 38,000 170,000 126,000 1.TOYOTA 120,000

• 120,000

5.HONDA 102,000 2,400 66,400 33,200 6.NISSAN 109,400

• 28,800
• 20,200

CV

100,000 40,000 60,000 7.GENERAL MOTOR 28,800

• 8.HINO

16,300

• 16,300

9.DAIMLERCHRYSLER 170,200 100,000 50,000 2.MITSUBISHI 1,208,300 658,700 440,200 TOTAL 10,000

• 10,000

11.BMW. 12,000

• 12,000

10.YMC Assembly

TOTAL

1 TON P/U

PC Company

8 8 Capacity 2004 Capacity 2007 Increase

Toyota 300,000 500,000 66.7% Nissan 143,900 200,000 40.0% Isuzu 140,000 200,000 42.9% Ford/Mazda 135,000 200,000 48.1% Mitsubishi 126,000 200,000 58.7% Honda 120,000 220,000 83.3% General Motors 110,000 150,000 36.4% Bangchan 20,000 20,000 0.0% Thonburi 19,500 19,500 0.0% Yontrakij 12,000 12,000 0.0% BMW 10,000 10,000 0.0% Hino 9,600 9,600 0.0% Volvo 6,000 6,000 0.0%

Total

1,152,000 1,747,100 51.7%

Automobile Production Capacity Plan Automobile Production Capacity Plan 2004 2004-

• 2007

2007

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World Production World Production in 2005 in 2005

2,539,865 9 KOREA 1,797,773 10 ENGLAND 3,628,613 5 FRANCE 2,781,714 6 BRASIL 5,758,710 3 GERMANY 5,708,421 4 CHINA 11,962,152 1 U.S.A. 7 2,693,901 8 CANADA 1,669,563 11 MEXICO 1,642,070 12 INDIA 1,340,940 13 RUSSIA 10,729,531 2 JAPAN 1,032,481 15 ITALY 1,125,316 14 THAILAND Production NO. Country

Target: Detroit of Asia

Become a TOP 10 auto producer by year 2010 Produce 2,000,000 units/yr, >50% for export

SPAIN 2,748,226

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Samples of New 2005 Investments Samples of New 2005 Investments

Doubling capacity to 550,000 units/yr by 2007 $1.2 billion to produce 100,000 pickups & SUVs, 224,550 autos, 14 million auto parts. $2.2 billion worth of steel, components, electronic parts to be sourced locally Doubling engine production Increasing production

• f engine blocks and

cylinder heads to 300,000/yr (70% for export to Asia) Expanding capacity, making Thailand its production base for Asia and Oceania By 2010 will triple trucks and buses to 30,000 units

TOYOTA HONDA HINO NISSAN GM

$1 billion investment to increase capacity:

• Auto parts
• Plastic parts
• Car body parts sets
• Transmissions
• Diesel and benzene engines

Expanding production to 200,000 units/yr from 130,000. By 2008, 10 new models to be introduced to Thailand, most assembled locally $66 million paint unit in Rayong Auto production to increase to 160,000 units/yr from 110,000 Thailand established as hub for Asia

MAZDA

Establishing Thailand its regional ASEAN HQ and export hub for parts for light trucks

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2005 Auto&Parts Export Value Up 2005 Auto&Parts Export Value Up 46% 46%

Company Value # units $ 1,751 million 151,824 88,152 77,551 45,216 33,836 $ 930 million $ 751 million $ 530 million $ 544 million Increase 1 Toyota 188% 2 3 4 5 Mitsubishi 0.1% Auto Alliance Thailand 5% Honda 1.5% GM

• 25%

Total Exports $7.4 billion

• 440,715 autos

($ 5.1 billion)

• Components

($ 2.3 billion)

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Targets for Detroit of Asia: Targets for Detroit of Asia:

To be the To be the 10 10th

th of the World

• f the World by 2010

by 2010

SHORT TERM (2006) LONG TERM (2010) VEHICLES 1,000,000 Units

• Export 40%
• Domestic 60%

1,800,000 Units

• Export 40%
• Domestic 60%

MOTOCYCLES 5,000,000 Units

• Export 40%
• Domestic 60%

AUTO PARTS 200 Billion Baht

• Export 100%

Source: Federation of Thai Industries

2005, Achieved 1,125,316 Units 1 Year Earlier

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Auto part Suppliers Auto part Suppliers

• 1,709 part suppliers operating

– 709 OEM part suppliers

• 386 makers for automobile
• 201 makers for motorcycle
• 122 makers for both automobile and

motorcycle

– 1,000 suppliers for supporting industry & raw materials (mould & die, heat treatment, forging, casting, painting, plastic, rubber etc.)

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P/U Ratio = 58% Local Content = 80-90% P/U Ratio = 58% Local Content = 80-90% P/C Ratio = 33% Local Content = 30-70% P/C Ratio = 33% Local Content = 30-70%

Markets Ratio & Local Content Ratio Markets Ratio & Local Content Ratio

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Components not Sufficiently Components not Sufficiently Produced in Thailand Produced in Thailand

• Passenger Car Engines
• Fuel Injection Pumps*
• Transmissions*
• Differential Gears
• Injection Nozzles*
• Electronic Systems
• Electronic Control Units*
• Turbo Chargers*
• Substrates for Catalytic converters
• Anti-Lock Brake Systems

Opportunities: Opportunities:

*Current manufacturers not meeting demand

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Investment Opportunities: Investment Opportunities:

Mould & Dies / Precision Engineering Mould & Dies / Precision Engineering

Auto & Electrical/Electronics Sectors

• Few producers of mould and dies currently in

Thailand (high reliance on imports)

• Mould & Dies essential for further development of

auto and electrical/electronics clusters

• Manufacturers being forced to do own precision

engineering, mould & dies to meet customer demands and delivery times. This is very expensive.

• BOI responding to industry requests to increase

incentives and promotions

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AUTOMOTIVE AUTOMOTIVE FASHION FASHION Agri & FOODS Agri & FOODS ICT & SOFTWARE ICT & SOFTWARE TOURISM TOURISM OTHERS OTHERS

Chiang Mai Tourism Songkhla: Marine Food Products Songkhla Rubber, Para wood Furniture Pattani Haral Food Processing Chiang Mai Canned & Dried Fruits Chiang Mai Gems & Jewelry Chiang Mai Handicrafts Lumphoon Electronics Western Provinces High Value Vegetable Karnchanaburi Gems & Jewelry Surat Thani Shrimp Farms Surat Thani Samui Tourism Phuket Gems & Jewelry Trad Koh Chang Tourism Rajburi Orchids Ranong Shrimp Farms Phuket IT City Samut Songkram Marine Food Products Krabi Palm oil Satoon Marine Food Product Trang Marine Food Products Surat Thani Lang Suan Fruits Chumporn Fruits Chanthaburi Gems & Jewelry Chanthaburi: Tropical Fruits Chiang Rai High land crops Lumpang Ceramics Phuket: Tourism, Surat Thani Palm Oil Rajburi Pottery & Ceramics Surat Thani Para wood Furniture Petchaburi Pineapple Samut Sakorn Marine Food Products Nakornpathom Pork & Poultry Chiang Mai Clothes Tak Gems & Jewelry Chaiyapoom Textile & garment Nakornrajsima Silk Udon Thani Clothes & cotton Khon Kaen Clothes & cotton Surin Silk Ayuthaua Software & Electronics Samutprakarn Auto Parts/Accessories Rayong: Auto Assembly Cholburi: Petrochemical Saraburi Cement & ceramics Pathumthani Textlie Bangkok Digital Contents Saraburi Chicken, Dairy Farms Loei: Winery Khao Yai: Winery Khon Kaen Sugar Rajburi Sugar

Thailand Competitiveness Initiative Projects

12 July 2004

CLUSTERS IN THAILAND

Phayao Jewels shaping Sakon Nakon Clothes Pitsanulok Agriculture Machinery Ubon Rajthani Jewels shaping Nakornrajsima Basic plastic product Samutprakarn Leather Cholburi Electrical appliances Prachuab Kirikhan Basic Iron Production Phuket Medical Services

Kenan Institute Asia

Ayuthaua Auto Assembly

Samples of Clusters in Thailand Auto Clusters

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Bangkok Bangchan General Assembly Y.M.C. Assembly Thai Honda Manufacturing Samutprakarn Toyota Motor Thailand Isuzu Motors (Thailand) Siam Nissan Automobile Siam V.M.C. Automobile Thai Auto Work Millennium Motors Thai Yamaha Motor Thai Swedish Assembly Hino Motors (Thailand) Thonburi Automotive Assembly Ayudhaya Honda Automobile (Thailand) Pathumthani Thai Suzuki Motor Samutsakorn Thai Rung Union Car Rayong Auto Alliance (Thailand) General Motors (Thailand) BMW Manufacturing (Thailand) Kawasaki Motors Enterprise (Thailand) MMC Sittipol Chachoengsao Toyota Motor Thailand Isuzu Motors (Thailand)

• 1. AUTOMOTIVE CLUSTER

Automotive Manufacturer Location

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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%

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%

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%

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%

Pathumthani

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%

Principal Auto Parts Production Sites in Thailand Principal Auto Parts Production Sites in Thailand

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57 Industrial Estates 57 Industrial Estates Deep seaports: Deep seaports:

5 million TEU 5 million TEU capacity capacity

Suvarnabhumi Airport

Key Infrastructure Key Infrastructure

25km

Laem Chabang Port

Eastern Seaboard Industrial Area Many auto firms Many auto firms are located on are located on Thailand Thailand’ ’s Eastern s Eastern Seaboard Seaboard

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BOI Incentives for BOI Incentives for Automotive Projects Automotive Projects

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TAX INCENTIVES

• Corporate income tax

holidays up to 8 years

• Import duty reductions
• r exemptions on

machinery and raw materials NON-TAX INCENTIVES

• 100% Land ownership

rights for foreign investors

• Permission to bring in

foreign experts and technicians

• Work permit & visa

facilitation

Role of BOI in Promoting Investment Role of BOI in Promoting Investment

Basic BOI privileges and incentives Basic BOI privileges and incentives

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Basic Zone Basic Zone-

• Based Corporate

Based Corporate Income Tax Exemptions Income Tax Exemptions

*Laem Chabang IE and Rayong IE receive 8 years 8 Years

Zone 3 3 Years *7 Years Zone 2

Not Exempt

3 Years Zone 1

Outside IE Inside IE

Zone

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Zone 3 Zone 2 Zone 1

AUTO

Exempt 50% reduction 50% reduction

• Duty on

Machinery

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

Exempt from corporate income tax for 8 years Exempt from machinery import duties

Machinery Duty: 50% reduction

Corporate Income tax exemption: In IE - 3 years

• High-Tech

Machinery Duty: Exempt

Corporate

Income tax exemption:

exempt 8 years

Machinery Duty:

In IE exempt Outside IE 50% reduction Corporate Income tax exemption: In IE - 7 years Outside IE - 3 years

• General

Component Parts Manufacturers: Car Assemblers:

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Automotive Industry Cluster Automotive Industry Cluster:

:

Assemblers & Suppliers Assemblers & Suppliers Applying as Package for BOI Promotion Applying as Package for BOI Promotion

• Conditions

– Total investment at least THB 10 billion ($250 million) including component parts

manufacturing – Covers:

• Automotive Assembling
• Manufacture of Vehicle Parts and Engines
• Incentives

– All Zones: Duty Free Machinery

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Natural Gas Vehicles Natural Gas Vehicles

Current status

• 4,678 NGV vehicles
• 4,359 are taxis
• 28 NGV service

stations NGV on national agenda: Government Targets 120,000 NGVs by 2008

New BOI NGV incentives:

• NGV parts production

including engines, tanks and

• ther 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

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World World’ ’s Most Expensive Cities s Most Expensive Cities 2006 2006

1) Moscow 20) Shanghai 2) Seoul 32) Hanoi 3) Tokyo 37) Ho Chi Minh 4) Hong Kong 48) Jakarta 5) London 54) Guangzhou 6) Osaka 68) Mumbai 7) Geneva 73) New Delhi 10) New York City 114) Kuala Lumpur 14) Beijing 127) Bangkok 19) Sydney 139) Bangalore

Source: Mercer Human Resources Consulting Worldwide Cost of Living Survey 2006

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Comparison of Land and Office Comparison of Land and Office Prices Prices

Bangkok Beijing Hanoi Jakarta Manila Singapore

35 – 40 45 -50 1 7.4 1,726 3.60 – 4.10 72.50 – 221.63 4.95- 12.50 34.79 – 36.06 22 – 26 1,800 – 2,500 1,529 – 2,646 No Land Purchase 0.18 22.00 2,000 – 4,000

Kuala Lumpur Industrial Estate Purchase Rate (per sq.m.)

54.71 55.65 - 68.02 5.3 - 10.6

Monthly Industrial Estate Rents (per sq.m.)

4.86 5.6 - 8.71

• Office Rent (per

sq.m.

11.67 34 - 40 9.96 - 14.21

Monthly Housing for Foreigners

1,581 2,300 – 6,000 924 – 1,056

Source: JETRO 16th Survey of Investment-Related Cost Comparison in Major Cities and Regions in Asia; prices are in US dollars

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Affordable Office Space Affordable Office Space

131.1 75.9 93.1 56.4 48.2 41.5 40.3 36.8 22.5 20.2

17.1

14.8

20 40 60 80 100 120 140 Total Occupancy Cost Per Yea (US$/Square Foot)

Tokyo (Inner Central) Hong Kong Mumbai, India Seoul, South Korea Shanghai (Puxi) Singapore Taipei Ho Chi Minh Guangzhou Bangkok Manila Jakarta

Source: CB Richard Ellis -- May 2006

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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 Services

Vendors meet customers program (BUILD Unit)

Investment Matchmaker Program ASEAN Supporting Industry Database (ASID) Dedicated to creating an enabling environment for investment Subscribe to free monthly BOI e-newsletter at www.boi.go.th

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THAI THAILAND LAND OF INVESTMENT OF INVESTMENT

Wher e success stor ies begin

THAI THAILAND LAND OF INVESTMENT OF INVESTMENT

Wher e success stor ies begin