Thailand’s first automotive assembly plant opened in 1961 and the industry has achieved significant milestones since then. Autos and auto parts generated the nation’s second highest export earnings last year. Today, Thailand is the largest automotive manufacturer in south-east Asia and ranks 15th worldwide with 2004 production of more than 900,000 vehicles. The Thai government has set a goal of producing 1.8 million vehicles by 2010 to become one of the world’s top 10 automotive manufacturers. With this track record and the government’s priority on further industry development, Thailand is poised to become the ‘Detroit of Asia’.
The country’s abundant natural resources and skilled workforce provide investors with a wide variety of investment opportunities, particularly in key sectors prioritized by the Thai government such as automotives. As a founding member of the Association of Southeast Asian Nations (ASEAN) and a steadfast proponent of economic co-operation among member nations, Thailand enjoys free trade access to the region’s growing market of over 550 million people – one of the world’s few expanding automotive markets.
Thailand’s burgeoning industrial clusters also provide growth opportunities for new entrants in the automotive sector. Missing linkages in value chains in key sectors are given targeted government incentives to provide support for further industrial development.
Virtually every major automobile brand is manufactured or assembled in Thailand. Several international manufacturers recently announced new rounds of investment to build factories and expand production capacity. Toyota Motor Thailand is investing $1.2bn to expand vehicle and parts production. General Motors began work on a $66m automotive paint unit and Honda Automobile Thailand will spend $36.25m to double its engine production capacity.
A car has more than 3000 parts and components – 20,000 if you count the small ones. Currently, the auto parts industry in Thailand comprises over 1700 part suppliers providing engines, engine components, body parts, brake systems, steering systems, suspensions, transmissions and electronics.
Both the domestic and export automotive markets are booming in Thailand. The Thai Automotive Institute (TAI) projects that the value of Thailand’s total auto parts export will amount to $5bn in 2006. $2bn is expected to come from original equipment manufacturer (OEM) auto parts and $3bn from replacement equipment manufacturer (REM) parts. Furthermore, the TAI forecasts that 800,000 units will be produced for export by 2010.
As automotive assemblers expand production, parts and component suppliers benefit from higher demand. International parts suppliers as well as multinational auto assemblers are expanding their business operations in Thailand. With the support of the Thai government, many investment and subcontracting opportunities exist for foreign suppliers to enter this market.
Investments opportunities exist in sophisticated electronic systems including moulds and dies technology, design, precision engineering and R&D and testing. Some components have to be imported, such as fuel injection pumps, transmissions and anti-lock brake systems, and so producers of these parts would be especially welcomed by the Thai auto industry.
The Thai government is also committed to advanced technology and establishment of product testing and R&D centres. With rising global oil prices, the development of a small car that runs on alternative fuel or a hybrid car may also be on the automotive agenda.
Thailand is very open to foreign investment. Liberal investment policies pose no export requirements, no foreign equity restrictions in manufacturing, no local content requirements, and no location requirements. The cost of setting up a business in Thailand is also relatively low. According to Mercer HR Consulting, Bangkok consistently ranks as one the least expensive cities in Asia.
The Free Trade Agreements that Thailand has with a number of countries have also been favourable for the automotive industry, boosting market access of local players abroad.
The automotive industry in Thailand continues to encourage development and education of future professionals and development of higher levels of research, as it strives to be a global sector leader. Today, Thailand has a skilled labour force of over 34 million people. In addition, the improved infrastructure – including a new airport in Bangkok at Suvarnabhumi and expansion at Laem Chabang port – will help make business even more efficient.