Thais seek automotive ties
- September 30, 2012
Thailand wants your expertise, investment
by Jim Barnes
If your ambitions include access to the Asian market, investment in Thailand deserves consideration.
“Thailand is one of the most undervalued automotive markets in the world," says Martin Apfel, president of GM Thailand.
Relations between Canada and Thailand are heating up. Prime Minister Stephen Harper visited Thailand on a trade mission in March, making commitments to stronger economic, security, social and cultural ties and discussing free trade.
The Thais, too, are reaching out. Representatives of Thai industry visited Toronto in June to promote the country’s automotive sector. And recently, the Thai Board of Investment (BOI) invited a small group of magazines, including Shop Metalworking Technology, to send representatives to assess the state of the industry.
Thailand is a member of ASEAN (Association of Southeast Asian Nations), a free-trade area. Its ten members have been experiencing dramatic growth in their automotive markets.
According to BOI, Thailand has the 18th-largest manufacturing output in the world. Major markets outside ASEAN include Japan, the U.S., China and Australia. In 2011 (the year of the flood) it ranked 14th in the world for car production, ahead of the U.K. and Italy. By 2014, it expects to be in the top ten. Plans call for production of some 2 million vehicles in 2012, about of them exports.
The sector currently includes 14 car and 10 motorcycle assemblers (employing 150,000), 635 Tier-One suppliers (250,000 employees) and 1,700 Tier-Two and -Three suppliers (175,000 employees).
GM, Ford, Honda, Mazda, Nissan, Isuzu, Suzuki, Volvo, Tata and other international manufacturers are represented in the industry. International parts suppliers with local operations include TRW, Delphi, Denso, Bosch, Visteon, NSK, Dana Spicer, Ogihara and a small Magna International operation.
The Thais are actively promoting investment. BOI offers tax-based incentives including exemption/reduction of import duties on machinery and raw materials and varying levels of corporate income-tax exemption. Non-tax incentives include permission to bring in foreign workers, to own land and take or remit foreign currency abroad.
Some 60 major industrial parks have been built to position suppliers close to their customers and optimize logistics.
There are some causes for concern, though. Last year’s floods constituted a major disaster and massive flood-control projects are now in the works.
Politically, Thailand is a constitutional monarchy. A coup d’etat in 2006 ousted the prime minister, but normalcy seems to have returned. Even during the coup, foreign businesses were largely insulated from the events, though logistical problems were a concern.
Of greater impact to manufacturing businesses, Thailand may have become a victim of its own success in building up its manufacturing sector. Unemployment is virtually nonexistent, and the companies we spoke to described recruiting as a challenge. Education is another problem: there is a relative lack of skilled trades, and many foreign transplants have reported the need to do extensive staff training.
Despite these issues, there are many examples of major investment in the Thai automotive industry.
- Toyota established its first plant in Thailand 50 years ago. Its four-year-old Ban Pho plant employs 3,000, with a capacity of 100,000 vehicles a year.
- A large domestic Tier-One parts supplier, Thai Summit Group, is a diversified international parts supplier with extensive engineering capabilities. Sales are $1.9 billion per year. Founded in 1977, it has 40 subsidiaries and 25,000 employees. Even this domestic player is concerned about the tightening labour market. It has targeted automation and productivity enhancement for major investment.
- Ford Thailand Manufacturing recently opened a $450-million, 200,000-sq. m. plant that could eventually employ up to 2,200 workers. Plans are to produce eight new vehicles by mid-decade, starting with the Focus.
- GM opened its first major plant in 2000 and today employs more than 4,600, with a capacity of 180,000 vehicles. Its $200-million Duramax powertrain plant opened in 2011. Staff will total about 700, supplying 120,000 engines per year at capacity.
Thailand can be a surprise as an automaking country, both for the scope and sophistication of its industry. It offers opportunity to investors interested in developing business in this market, including incentives and excellent access to the quickly growing ASEAN free trade area and other Pacific markets.
For more information, see www.boi.go.th.
Jim Barnes is a contributing editor to Shop Metalworking Technology.