Investment Opportunities in

Auto Sector in Thailand

Mr. Chokedee KaewsangDeputy Secretary General

Thailand Board of Investment

• Current Status and Trend of Thailand

Automotive Industry

• Thailand’s Human Resource Development in

Automotive Industry

• Investment Promotion Policy for Automotive

Industry

Outline

3

Overview of Thailand Automotive Industry

World’s Automotive Production 2013

(Units of production)World’s Production: 87.24 Million (+3.6%)

Thailand : 2.45 Million (+4.3%)

#9 in Worlds’ Automotive Production

#1 in ASEAN for Automotive Production

Source: OICA as of Mars, 2014

Thailand Ranked #12

2014 Automobile Production

0

5000000

10000000

15000000

20000000

25000000 World’s Production: 89.7 Million

(+2.6%)

THAILAND: 1.89 Million (-23.5%)

#12 in Worlds’ Automotive Production

#1 in ASEAN for Automotive Production

2014 No.12

1,880,007 units

Source: OICA as of Mars, 2015

Thailand as Production Hub for All Regions

Asia (32%)

Middle East (24%)

Oceania (21%)

EU (7%)

Africa (4%)

Thailand exports car to the world

Source: Automotive Summit ( TAPMA) as of June 20, 2013

Thailand:

9th largest

automobile

producer in

the world in

2013

Output:

18 assemblers

with a

combined

capacity of 2.8

mil. Units in

2015

Target:

To

manufacture

3,000,000

units in 2017

(2014

produced 1.88

mil.units

exports 1.12

mil.units to

150 countries)

High local

content :

80-90% for

pick-up and

30-70% for

passenger car

Automotive Capacity Getting Stronger

Future Expansion from Eco-car 2

• 9 brands ready to operate Eco-car 2 programs

• Create additional capacity of 1.38 million units

units

Thailand Automotive Industry Growth

559,428389,100

158,130

327,233411,721

459,418584,951

750,512

928,0811,125,316

1,188,0441,287,346

1,394,029

999,378

1,645,304

1,457,795

2,453,717 2,457,057

1,880,007

589,126

363,156144,065

218,330262,189

296,985409,362

533,176626,026

703,405682,161

631,251682,161

548,871

800,357

795,250

1,436,3351,330,672

881,832

14,000 42,20066,700

130,000

152,836175,293180,554239,440322,053

440,715538,962

690,100776,241

535,563

895,831

735,627

1,026,671

1,128,152

1,128,102

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Production Sale Export

Year 2014

Production = 1,880,007 Units -23%

Domestic Sale = 881,832 Units -34%

Export = 1,228,102 Units 0%

Pure

Thai

23 %

SMEs

Foreign

J/V

Foreign

Majority

54 %

LocalSuppliers

Tier 1

LSEs

(Total 709 Companies)Thai

Majority

23 %

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

Source: Thai Autoparts Manufacturers Association, OIE and BOI as of 2014

(18 car companies, 8 motorcycle companies)

100,000 workers

(1,700 Companies)Tier 2,3

Assembler

Structure of Thai Automotive Industry

10

45

0,0

00

wo

rker

s

Strong Cluster &

Supply Chain

Structure

TIE

R 2

& 3 SME (Local

suppliers)

(1,700 companies)

Stamping, plastics, rubber, machining, casting, forging, function, electrical, trimming

TIE

R 1 Vehicle parts

(386 companies)

Vehicle &motorcycle parts (201 companies)

Engines, Drivetrains, Steering, Suspensions, Brake Wheels, Tires, Bodyworks, Interiors, Electronics and Electric systems.

AS

SE

MB

LE

R Passenger & Pick-up (17 companies, 23 factories)

Motorcycle (8 companies, 8 factories)

Vehicles Assemblers (100,000 workers)

Dealer, Service center (200,000 workers)

Parts manufacturers (450,000 workers)

Supporting industries (100,000 workers)

SUPPORTING INDUSTRY

(Machinery, Equipment & Devices, Mold& Die, Jig & Fixture)

SERVICE

INDUSTRY

-Distribution

(W/H)

-Finance

-Testing

-Consulting

-Logistics

-Banking/

Leasing

UPSTREAM INDUSTRY (Steel, Plastics, Rubber, Electronics,

Glass, Textiles, Leather, Chemicals, Oil, Coating, and Galvanized

Metal)

POLICY&

SUPPORTING

BODY

-Government

-Associations/

Institutes

-Universities/

Technical

Colleges

12

Manufactures Brand Capacity Future Expansion

1 Auto Alliance (Thailand) Mazda, Ford 300,000 -

2 BMW Manufacturing (Thailand) BMW/MINI 6,000 -

3 Dongfeng Automobile Dongfeng 5,300 -

4 Ford Motor Company (Thailand) Ford 200,000 -

5 General Motors (Thailand) Chevrolet 160,000 -

6 Hino Motors Manufacturing (Thailand) Hino 25,150 -

7 Honda Automobile (Thailand) Honda 240,000 240,000

8 Isuzu Motors Company (Thailand) Isuzu 220,000 -

9 Mitsubishi Motors (Thailand) Mitsubishi 450,000 -

10 Nissan Motor (Thailand) Nissan 240,000 -

11 SAIC Motor-CP MG 50,000 -

12 Scania (Thailand) Scania 1,000 -

13 Suzuki Motor (Thailand) Suzuki 135,000 -

14 Thonburi Automotive Assembly Plant Mer. Benz 7,000 -

Tata 8,000 -

15 Toyota Motor Thailand Toyota 700,000 -

16 Toyota Autoworks Toyota 18,000 -

17 TC Manufacturing and Assembly Fuso 12,000 -

18 Thai-Swedish Assembly Volvo / UD 21,700 -

Total 2,799,150 3,039,150*

Note *Not include expansion project of Eco-car Phase 2

Capacity of Vehicle Production in Thailand

44. Federal-Mogul47. Michelin50. GKN Driveline

52. Goodyear56. Grupo Antolin58. Bayer59. TI Automotive65. Draexlmaier67. American Axle73. Rieter Auto.84. F-Tech86. Hayes Lammerz93. 3M

13

2. Denso4. Aisin Seiki13. Yazaki15. Sumitomo16. Toyota Boshoku18. Calsonic Kansei19. JTEKT20. Hitachi28. Toyoda Gosei33. NTN34. NSK35. Mitsubishi39. NHK Spring40. Koito41. TS Tech43. Takata

46. Bridgestone

49. Tokai Rika

57. Showa

61. Mitsuba

66. Asahi Glass

72. Stanley

74. Akebono Brake

82. Sanden

84. F-Tech

92. Alpine

94. Pioneer

98. Omron

Japanese Global Suppliers

28/29 Companies 29/71 Companies

Other Global Suppliers1. Robert Bosch3. Continental6. Faurecia7. Johnson Control8. ZF11. TRW12. Delphi14. Lear17. BASF 21. Valeo22. Visteon23. Autoliv25. Mahle27. Dana31. BorgWarner36. Teneco

Top 100 Global Suppliers Active in Thai Automotive Industry

Strength of Thai Automotive Industry

Thai Automotive Industry - OEM Location

Source: Thailand Automotive Institute

RayongBody Parts: 24%,Engine Parts; Drive, Transmission &Steering Parts: 15% each, Suspension & Brake Parts: 12%,Electrical Parts: 10%, Accessories: 7%, Mold&Die: 2%, Other: 15%

SamutprakarnBody Parts: 22%, Electrical Parts: 15%, Engine Parts; Drive, Transmission &Steering Parts: 8% each, Suspension & Brake Parts: 5%, Mold&Die: 4%, Accessories: 3%, Other: 36%

ChonburiBody Parts: 25%,Engine Parts: 22%, Drive, Transmission &Steering Parts: 15%, Electrical Parts: 9%, Accessories: 5%, Suspension & Brake Parts: 4%, Mold&Die: 4%, Other: 16%

BangkokBody Parts: 9%, Engine Parts; Electrical Parts; Drive, Transmission&Steering Parts; Accessories: 6% each, Suspension & Brake Parts: 4%, Mold&Die: 3%, Other: 60%

PathumthaniBody Parts: 18%, Engine Parts; Electrical Parts: 13% each, Suspension & Brake Parts: 10%, Drive, Transmission&Steering Parts; Accessories: 8% each, Other: 31%

Thai Automotive Industry- Auto parts Location

Source: Thailand Automotive Institute

“Great Leap of Next Decade” for ASEAN

Automotive Industry

Relatively low penetration of vehicles

Market expansion due to Rise of Income Growth and Rise of Middle Class

Push to produce small cars by Low Cost Eco Car Policy (Eco Car and Low Cost Green Car Policy)

More market competition due to liberalization under FTAs

Market: 5 million cars by 2020-larger than Japanese market in 2012. Production: Surpass 6 million cars through export growth by 2020.

Growth Factors

of ASEAN

Market

Source: Automotive Summit ( TAPMA) as of June 20, 2013

By 2018, ASEAN will be the 6th Largest Automotive Market Globally

1

2

3

4

5

6

7

8

9

10

17,708,634

11,562,701

3,524,789

3,475,760

3,173,634

2,904,338

2,593,769

2,409,826

2,204,229

1,941,253

SALE 2011Global Rank

29,010,852

16,466,283

5,788,462

5,364,935

4,591,476

3,850,511

3,499,860

3,429,031

2,704,451

2,563,360

SALE 2015F SALE 2018F

33,391,276

16,970,585

9,039,806

6,287,188

4,717,218

4,692,961

4,025,975

3,968,411

2,897,909

2,793,822Source: Frost & Sullivan & ASEAN Automotive Federation

Strong Network in ASEAN and ASEAN+6

Parts Sourcing for ASEAN+ Dialogue Partner

Source: ASEAN Automotive Federation(Automotive Summit 2013) as of June 24, 2013

19

Thailand’s Human Resource Development in

Automotive Industry

Thailand’s Current Human

Resource Status By Skills

Manufacturing 50%

Mechanics 26%

Engineering 7%

Electrical 5%

Electronics 7%

Acct/Admin. 5%

Others 1%

By Job Level

Staff 74%

Technical 7%

Supervisor 7%

Expert 5%

Engineer 4%

Executive 3%

By Education Level

Secondary-High School 50%

Vocational Certificate 15%

Diploma 25%

Degree 10%Source: Auto Summit 2013 (TAI/ Role of HR Development in Automotive Industry) as of

June 28, 2013

Thai monthly wages are competitive

Unit=US$Thailand

(Bangkok)

China

(Beijing)

Vietnam

(Hanoi)

Malaysia

(KL)

Singapore

Workers 366 522 155 429 1,230

Engineers (Mid-level) 699 863 355 1 ,038 2,325

Managers

(Department Chief

Level)

1,574 1,501 773 1,966 4,268

Monthly Legal

Minimum Wage

181*

(20 days)229 128 274 -

Social Security (%

paid by employer)5% 45.4% 22% 13% 16%

Source: JETRO 24th Comparative Survey of Investment-Related Costs

Comparison in Major Cities and Regions in Asia and Oceania, as of May 2014

HR Development in the Automotive Industry (AHRDP)

Ministry of Industry

The Federation of Thai Industries

THAILAND

JETRO (METI)

Japan Chamber of Commerce

JAPAN

• TOYOTA Production System

TOYOTA

• Skill Certification

NISSAN

• Mind Management

• Skill Manufacturing

DENSO

• Mold & Die

HONDA

SUPPORTED BY

JAPANESE COMPANIES

Source: Thai Automotive Institute as of July 1, 2013

23

Update on Investment Promotion Policy

24

New Approach to Granting Investment Incentives

Activity-based Incentives Merit-based Incentives

+

Classified incentives based on

the importance of activities

Grant additional incentives to encourage

more investment/expenditures that

benefit the country or overall industry

A1

A2

A3

A4

B1

B2

1. Competitiveness Enhancement

2. Decentralization

3. Industrial Area Development

A1

A2

A3

A4

B1

B2

A1: Knowledge-based activities, focusing on

R&D and design to enhance the country’s

competitiveness (8-year CIT exemption without

cap, exemption of import duty on machinery/raw

materials and non-tax incentives)

A2: Activities in infrastructure for the country’s

development, activities using advanced

technology to create value added, with none or

very few existing

investments in Thailand

(8-year CIT exemption, exemption

of import duty on machinery/raw

materials and non-tax incentives)A3: High technology activities which are

important to the country’s development,

with a few investments already existing in

Thailand (5-year CIT exemption,

exemption of import duty on

machinery/raw materials and

non-tax incentives)

B1/B2: Supporting industries that do not use high technology but are still important to value chain

(B1 : Exemption of import duty on machinery/raw materials and non-tax incentives

B2 : Exemption of import duty on raw materials and non-tax incentives)

A4: Activities with lower

technology than A1-A3 but

add value to domestic

resources and strengthen

supply chain

(3-year CIT exemption,

exemption of import duty on

machinery/raw materials and

non-tax incentives)

Activity-based Incentives

Non-tax Incentives

• Permit for foreign nationals to enter the kingdom for

the purpose of studying investment opportunities

• Permit to bring into the Kingdom skilled workers and

experts to work in investment promoted activities

• Permit to own land

• Permit to take out or remit money in foreign currency

Non-tax Incentives

4.6 Manufacture of General Automobile : B1

4.7 Manufacture of automobile engines

• Project must have pressing of parts, not less than 4 out of 5 parts,

as follows: Cylinder Head, Cylinder Block, Crankshaft, Camshaft

and Connecting Rod : A3

• Assembling of engine : A4

4.8 Manufacture of Vehicle Parts : B1 & A2 for Priority List (Cont.)

Eligible Activity for Automotive

4.8 Manufacture of Vehicle Parts for Priority Activities

• Manufacture of vehicle parts using high technology

• Manufacture of automobile parts for safety parts and energy-saving

parts

• Manufacture of parts for Hybrid, Electric Vehicle (EV) and Plug-in

Hybrid (PHEV)

• Manufacture of rubber tires for vehicles

• Manufacture of other vehicle parts

Incentives:

• 8 years corporate income tax exemption, accounting for 100% of investment (exc.

cost of land and working capital)

• Exemption of Import Duty on Machine

• Exemption of Import Duty on Raw Material used in manufacturing export

products

Eligible Activity for Automotive (Cont.)

Non-tax Incentives

• High Market Potential

• Strong Support Industries

• Skilled Labor

• Competitive Cost

Automotive : Attractive Investment Sector

Thank you