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Thailand : Detroit of Asia

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1 Thailand : Detroit of Asia
By.. Mr.Ninnart Chaithirapinyo Vice Chairman The Federation of Thai Industries Toyota Motor Thailand Good morning (afternoon) all members of the ______________. It is a great pleasure for me// to be with you today // in your beautiful country of Germany // to discuss potential business opportunities for both you,// and the people of Thailand.// My presentation today is entitled, // “Thailand: Detroit of Asia”.

2 Today’s topic I. Where are we? II. Where will we go?
III. How will we go? IV. Why Thailand? My remarks will cover the following topics: Where are We. Where will we go. How will we go and Why Thailand.

3 I. Where are we? Let’s first look at // where we are//
with respect to the Thai Automobile Industry.

4 Auto Policy by Government Movement of Automotive Industry
1.1 Circumstance Change in Market Topics ’ ’ ’ ’ ‘10 Auto Policy by Government Movement of Automotive Industry Car Manufacturer Trend Local content regulations Ban for CBU vehicle import Deregulation of Local content Tariff reduction Free competition 25% local Content requirement Increase of local content to 50% Abolishment of local content FTA Negotiation AFTA Tariff reduction to 0% Higher competition Regulation Deregulation Liberalization This slide depicts the current changes// in the Thai automotive market. It represents// the history of automotive policy, // government support,// and local content regulations.// The Thai automotive industry // has been in continuous development from being only //a vehicle assembly business, // to a full car manufacturer. Now, we fully compete on the stage of // global car competition. Vehicle Assembly Asian Car Global Car Country Competition Regional Competition Global Competition

5 Company PC 1 TON P/U CV TOTAL
1.2 PRODUCTION CAPACITY IN 2005 Company PC 1 TON P/U CV TOTAL 1. TOYOTA 200,000 50,000 450,000 2. ISUZU - 180,000 20,000 3. MITSUBISHI 100,000 20,200 170,200 4. AUTO ALLIANCE (Ford& Mazda) 2,700 132,300 135,000 5. HONDA 120,000 6. GENERAL MOTOR 95,000 115,000 6. NISSAN 33,200 66,400 2,400 102,000 8. HINO 28,800 9. DAIMLERCHRYSLER 16,300 10.YMC Assembly 12,000 11. BMW. 10,000 12. VOLVO 474,200 773,700 121,200 1,369,100 Let’s first look at Thailand’s current production capacity for the 12 major assemblers in the industry. As you can see at the bottom right hand corner of this chart,// Thailand’s production capacity for 2005 is expected to be around million units. This will be expanded to more than// 1.5 million units in the near future.

6 P/U Ratio = 58% Local Content = 80-90% P/C Ratio = 33%
1.3 Market ratio P/U Ratio = 58% Local Content = 80-90% P/C Ratio = 33% Local Content = 30-70% Our domestic market is comprised of // both pickup trucks and passenger cars // with the majority, of 58%, being in the pickup segment. Passenger cars represent only 33%. The remaining share consists of other commercial vehicles. For local content, pick up utilizes almost 100% of local content while Passenger car utilizes local content around 30-70%.

7 LOCAL SUPPLIERS Foreign Joint Venture Assemblers 12 Companies Tier 1
1.4 Industry structure Foreign Joint Venture Assemblers 12 Companies LEs Tier 1 Foreign Majority 287 Thai Majority 68 Pure Thai 354 709 Companies Here is the grouping of the type of companies //that contribute to the Thai automotive industry. As you can see,// there are 12 foreign joint venture assemblers in Thailand, 709 tier 1 companies, //and approximately 1,000 tier 2&3 local supplier companies SMEs Tier 2&3 LOCAL SUPPLIERS 1,000 Companies

8 Contribution of Auto Industry to Thai Economy
GDP EMPLOYMENT The production of vehicles and parts has contributed to Thai economy at 16% of gross domestic product (GDP ). While the number of employed person Hiring in the auto industry is 8% from the overall employment. Manufacturing Sector

9 1.5 Production, Domestic sales and Exports
Unit This slide depicts the movement of // Production, Sales, and Exports for Thailand over past 12 years. 1997 and 1998 represented the period of our financial crisis //where we experienced a tremendous downturn in our industry // as well as most other businesses. However, //since 1999, we have enjoyed steady growth, // where today we will achieve all-time volume records for all 3 categories.

10 (Ranking compared with other products)
1.6 Thai Export Value (Ranking compared with other products) Million US$ No.1 Computer 9,320 No.2 Vehicles & Parts 5,681 No.3 Circuit Board 4,974 No.4 Rubber 3,432 No.5 Plastic 3,132 The exports of vehicles and auto parts rank # 2// among all products exported by Thailand. Only computers rank higher. Thus, //you can see the important role that // the Thai auto industry plays in the total economy of Thailand.

11 1.7 World Productions & Sales Ranking in 2004
Country NO. Productions Sales U.S.A. 1 11,907,588 17,294,805 JAPAN 2 10,515,698 5,844,327 GERMANY 3 5,530,129 4 3,563,860 CHINA 5,056,715 5,061,180 KOREA 5 3,470,119 14 1,091,577 SPAIN 6 3,011,010 8 1,891,383 FRANCE 7 2,756,920 2,473,312 CANADA 2,669,961 10 1,575,590 BRAZIL 9 2,206,189 1,578,775 UK 1,856,057 2,957,200 MEXICO 11 1,567,337 13 1,114,099 INDIA 12 1,511,171 1,343,779 RUSSIA 1,392,646 1,376,273 ITALY 1,060,171 2,522,737 THAILAND 15 928,081 17 626,026 TURKEY 16 820,135 757,092 In 2005 Thailand will rank No.14 in Production and No.17 in Domestic sale and will celebrate One Million Productions in December This slide shows the 2004 world ranking for// auto production and sales. As you might guess, // The U.S. ranks just ahead of Japan in production // with nearly 12 million units, //while their sales are far ahead of any other country in the world. Germany ranks #3 in production //and #4 in sales. Thailand is #15 in production and maintain number 17 in sales. I would like to note that //Thailand is expected to rank #14 in production in 2005 //and #17 in sales. We will celebrate //our 1-millionth production units this November// which we consider quite a milestone for the industry.

12 1.8 Productions, Domestic Sales and Exports in 2005
FORCASTING, 2005 EXPORT FORCAST 2005 Company 2005 (units) TOYOTA 150,000 MITSUBISHI 100,000 FORD & MAZDA 65,000 GENERAL MOTORS 50,000 ISUZU HONDA 40,000 OTHERS 30,000 TOTAL 500,000 In 2005,//we expect production to grow to about 1.1 Million units, //comprise of 680,000 units for the domestic market, //and 500,000 units for exports. Toyota will top all company export manufacturers //with about 150,000 units, followed by Mitsubishi, And the combination of Ford and Mazda.

13 II. Where will we go? Now, let’s see where we will go from here.

14 Detroit of Asia’s Target
Production 1.8 million units with export 40% in 2010 Being 1 ton P/U production base of the world Being the production base of motorcycle We have an ambitious target as we strive to become // the “Detroit of Asia”. By 2010, // we expect to produce approximately 1.8 million units // with exports representing about 40% of the business. // We also expect to be the world’s production base for 1-ton pickup trucks // and already have a pretty good start at this. We also expect to be //a sizeable production base for both motorcycles and OEM and REM parts for the industry. Being the production base of OEM and REM parts

15 III. How to go? Now, turning to “How to go?”

16 3.1 AHRDP Objective : To enhance competitiveness in term of price,
(Automotive Human Resource Development Project) Objective : To enhance competitiveness in term of price, quality and delivery : To Improve the following: - Engineering capability - Mould & Die-making capability - Manufacturing capability (Plastic/ rubber, Casting, Machining,Stamping) First of all,// we need to strengthen the competitiveness of our parts suppliers through an Automotive Human Resource Development Project, //which will be a joint effort between the Japanese government, // the Thai Government, //and the private sector.// We will focus on improving engineering capability,// die &mould making capability,// and manufacturing capability.// The project will start in the fourth quarter of this year // by training 2,000 trainers, then, each trainer will teach 100 trainees in their own companies. We expect that 200,000 trainees will be trained in this 5-year plan. (Joint project among Jetro, JCC,TAI, FTI)

17 R&D and Training fund will be managed by term committee
Car assemblers withdraw for Oversea & Domestic training Scholarship R&D SOURCE OF FUND CAR ASSEMBLERS PART MAKERS 90% R&D TRAINING FUND SMEs withdraw for Training R&D 100% Moreover, The automotive cluster will set up the R&D and Training fund // to strengthen the human resource competitiveness.// The source of funding for this project will come exclusively from //the car manufacturers and parts makers. 90% of the money will be used by // car assemblers with the balance used by SME’s. Moreover,//Donator will benefit from tax privilege, the reduction in corporate income tax by 2 times of expense amount. 10% R&D and Training fund will be managed by term committee

18 To expand additional market
3.3 Free Trade Agreements To expand additional market INDIA (Pop~ 1,000 million) CHINA (Pop~ 1,300 million) PERU (Pop~ 28 million BAHRAIN (Pop 0.9 million) AUSTRALIA (Pop ~ 20 million) THAILAND (Pop ~ 64.8 million) AFTA (Pop ~ 500 million) NEWZEALAND (Pop ~ 4 million) The expansion of the FTA, //or Free Trade Agreement, is another way to expand our business.// Thailand is in the process of negotiating// & implementing FTA’s with 8 countries and //two economic group, //namely BIMSTEC and ASEAN to promote free trade of its products. BIMSTEC JAPAN (Pop~127 million) AMERICA (Pop~292 million)

19 3.3 Free Trade Agreement : Australian Tariff Reduction
10 % increase In export Tariff reduction 30 % increase in export We have already seen great progress with the FTA’s. For instance, with Australia, the tariff reduction has produced a significant increase in our exports . Tariff reduction

20 The opportunities for Automotive Industry
I. Enhancing trade in vehicles The Australian and Thai vehicles are complementary. There are global platform similarities and both use the right hand drive format. Thailand is a centre for light commercial vehicles production (Detroit of Asia). Australia has a competitive advantage in large car production. The trade expansion would be expected to affluent rise as a result of the tariff reduction. This FTA made perfect sense as our automotive industry’s can gain much from one another. This can be the case with many other countries in the future.

21 The opportunities for Automotive Industry
II. Enhancing trade in Auto components There will be trade exposure potential for exports and sales under TAFTA. Improving the economies of scale via production increases as well as cost reduction from cheaper raw material ex: steel, copper, aluminum etc. We expect great opportunities to exist between both partners as it will improve economies of scale due to production increases.

22 The opportunities for Automotive Industry
III. Enhancing in Services and Investment Enhancing in the service in the area of training, technology transfer, Design & Engineering Alliance, Mold & Die making or plastic injection ,etc. Labor and services are able to move easier under the TAFTA. Leading to export engineering, design and technical expertise. There are motor vehicle service, repair opportunities in the aftermarket sector and also auto part reconditioning . BOI offers more privilege for the auto industry. These pluses are also apparent in the non-production end of our business, such as service training and various technology transfers. The aftermarket business benefits as well, and additional privileges are earned from BOI.

23 Japan-Thailand Economic Partnership Agreement I. Automobiles
2005 2006 2007 2008 2009 Passenger car Exceed 3,000 cc. 80% 75% 70% 65% 60% Passenger car less than 3,000 cc. Renegotiation will commence on a date to be agreed upon before signing Besides, TAFTA on 1 September this year,// Prime Minister Koizumi and Prime Minister Taksin // announced the agreement in principle Of Japan and Thailand Economic Partnership Agreement. The commitment of both sides on the industrial sector// will be undertaken //to promote competitiveness of the auto and part industry. For passenger car over 3,000 cc.,// the tariff will reduced 5% each year // until it reaches 60% in 2009// and will then maintained at 60%. While passenger car under 3,000 cc.// both sides will renegotiate on market access// on a date to be agreed//before signing JTEPA. A political declaration on automobile will be issued at the time of signing JTEPA

24 Japan-Thailand Economic Partnership Agreement II. Auto parts
The tariff rate will be reduced to 20% and maintained before eliminate in 2011 Tariff over 20% Tariff at 20% and below The tariff rate will be maintained and eliminated in 2011 On the date of entry into force of the JTEPA// auto parts with tariff rate over 20% // will be gone down to 20% // and maintained until elimination in 2011. For items with tariff rates 20% and below// will keep continue before elimination in 2011// while sensitive items will be 0% in 2013. The Auto parts subjects to be eliminated according to the AFTA scheme in 2010, which is not affect the European and American Auto industry// because tariff on auto part reduces gradually. The conclusion on auto part represent // the compromise point of JTEPA The tariff rate will be maintained and eliminated in 2013 Sensitive (5 items)

25 Japan-Thailand Economic Partnership Agreement
III. Iron and steel products Some products will be eliminated on the effective date. The others will be abolished, at latest, by the first day of the 11th year after the entry into effect. For some specific hot rolled coils and plates, zero tariff quota scheme will be established and their Quantity will be reviewed annually. Both sides will eliminate tariff on almost items// from the effective date// while the others will be Eliminated, at latest, by the first day of the 11th year. Zero tariff quota scheme will be established For hot-rolled coils and plates.

26 IV. Why’s Thailand So why consider Thailand to expand your businesses?

27 4.1 Nine Government policies in 2005
Poverty Eradication Policy Human development policy and quality of life Economic restructuring policy to create equilibrium and competitiveness Natural Resources and Environmental policy Foreign policy and international economic policy Policy on the development of the legal system and good governance Policy to promote democracy and civil society process National security policy Policy according to directive principles of fundamental state policy There are many reasons that Thailand offers you great opportunity and Here are just a few. I would like to highlight numbers 3, 5, and 6 For instance, promote adding value to goods, Develop industrial system to increase capability And conduct a proactive foreign policy. however, as they deal with economic and political issues, and I know that these are major concerns for any foreign investors. In short, Thailand offers economic and political stability and welcomes those who participate in the automobile business.

28 Citroen, Peugeot,Volkswagen
4.2 Global Brands in Thailand 4 ANNUAL PRODUCTION CAPACITY 1.2 MILLION UNITS < JAPAN > Toyota+ R&D Center Honda + R&D Center Isuzu,Mitsubishi, Mazda,Hino, Nissan, < EUROPE > Citroen, Peugeot,Volkswagen ,BMW, Volvo ,Daimler < USA > Ford + Asia Pacific HQs GM + Asia Pacific HQs Chrysler Most Global brands have already established their Production base in Thailand, including Toyota, Honda, Isuzu, GM and Ford. Some companies, like Toyota, Honda & Isuzu Have also established R&D centers in Thailand.

29 Possibility for expansion potential
4.3 Car ownership Possibility for expansion potential America persons / unit Japan persons / unit Malaysia persons / unit Singapore persons / unit Thailand persons / unit Philippines persons / unit Indonesia persons / unit Vietnam persons / unit Not only government policy endorsement and establishment of global brand in Thailand, But also the potential to expand the domestic Market. As you can notice from the slide, The potential car buyers in Thailand still represent a high portion of the population at 10 persons per unit. It is clear that consumer demand for// personalized transportation will drive sales as the ability to buy rises to match aspirations. In contrast, the US,and Japan have a low index level, reflecting higher levels of existing ownership and reduced potential for further growth.

30 liberalization policy Attractive government incentives
4.4 Why Thailand Political stability liberalization policy Attractive government incentives Government Good & Massive infrastructure network ( Electricity ,Telecommunication , Air ports , Ports ) Other reasons for investing in Thailand include: Political stability—Liberalization policy— Attractive government incentives. Also, Thailand offers a good, // massive infrastructure network with regard including //ample electricity, // telecommunications,// sea ports, and a new airport. Infrastructure

31 4.4 Why Thailand Market Supplier Considerable market size
Large production base for pick up truck Gateway to 500 million people of ASEAN Market Rich pool of supporting industries Good access to raw materials Cheaper parts manufacturing cost In addition,// we offer a large market, and, as mentioned before,// the largest Production base for pickup trucks, as well as the gateway to 500 million Asian people. We also have a rich supply of supporting industries, good access to raw materials, and inexpensive manufacturing costs. Supplier

32 Abundant of quality labor forces Language proficiency
4.4 Why Thailand Abundant of quality labor forces Language proficiency Hospitality and friendly attitude People Delicious foods and fruits Attractive tourist places Plenty of golf courses We have an abundant supply of quality labor who possess language proficiency and who are friendly and hospitable. Let’s not also forget some of the other amenities such as delicious food, attractive tourist locations, and plenty of golf courses. Amenity

33 1. Mirror Set 4.5 Low Cost & Competitive Market 2.Glass set
Here are some of the competitive parts components we currently manufacture.

34 3.Stamping part 4. Insulator Set
4.5 Low Cost & Competitive Market 3.Stamping part 4. Insulator Set Here are some more.

35 5.Rubber Set 6. Interior Set
4.5 Low Cost & Competitive Market 5.Rubber Set 6. Interior Set

36 7. Engine Set 4.5 Low Cost & Competitive Market GASOLINE DIESEL
We also produce a variety of engines in Thailand. GASOLINE DIESEL

37 Opportunity to invest in Thailand!!
4.6 Opportunity for Auto Industry INSUFFICIENT COMPONENTS 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 Training Service Design & Engineering Mould & Die Making Plastic injection Opportunity to invest in Thailand!! Here is a list of parts components which we will have insufficient production capacity in Thailand. These include passenger car engines and transmissions, mould & die making, plastic injection mould. Hence, there are good opportunities to invest in Thailand. * New investment

38 4.6 Opportunity for Auto Industry PARTS MANUFACTURERED IN THAILAND
Engine - Diesels, Motorcycles Engine Components - Starters, Alternators, Pumps, Filters, Hosed, Gears, Flywheels Body Parts - Chassis, Bumpers, Fenders, Hoods, Door Panels Brake Systems - Master Cylinders, Drums, Disc, Pads, Linings Steering Systems - Steering Wheels, Gears, Columns, Pumps, Linkages Suspensions - Shocks, Coils, Ball Joints Transmissions - Gears, Casings, Rear Axles, Drive Shafts, Propeller Shafts Electrical / Electronic - Alternators, Starters, Speedometers, lamps, Motors, Flasher Relays Interiors / Exteriors - Seats, Mats, Weather Strips, Console Boxes Others - Windshields, Seat Belts, Radiators, Wheels, Compressors This slide represents some of the parts that are currently produced in Thailand. For instance; Diesel engines, steering wheels, drum and disc brakes, suspension systems, transmissions, Electrical and electronic systems and so on.

39 + + BRIGHT FUTURE 4.6 Opportunity for Auto Industry
POTENTIAL BUSINESS GROWTH FOR NEW/EXISTING INVESTORS THAILAND GOVERNMENT SUPPORT PRODUCTION VOLUME INCREASE + + With the effort of the private sector, along with favorable government support, we can see a very bright future for the auto industry in Thailand. EFFORT OF THE PRIVATE SECTOR 100% LOCALIZATION

40 Vielen vielen Dank Again,// I wish to thank you all for your kind attention, and look forward to talking to you later// about the business opportunities that exist in// our great country of Thailand. Vielen vielen Dank Thank you very much.

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