Opportunities in Thailand's automotive sector

Thailand's rock-solid automotive industry offers opportunities for investment around every corner. Incentives are in place to spur production of everything from fuel pumps to valueadded electronics to eco-cars, and there is also plenty of room for development in areas, such as design, R&D and testing centres. Optimism pervades the industry, as automotive exports are poised to grow on the wings of Thailand's free-trade agreements (FTAs) with many countries. The sizable ASEAN market is also ripe for cultivation. Truly a global player, the Thai industry has expanded from its days as strictly an assembler into a major production centre. Currently the industry employs more than 300,000 people and generates 12% of the national GDP. With shipments steaming to 130 countries, Thailand is currently the world's largest producer of one-ton pickup trucks and the seventh-largest automotive exporter overall. It is the top manufacturer in all of South East Asia, with measures in place for expansion. More foreign makers now appreciate Thailand as a prime location for R&D investment as well. For example, in recent years Toyota has established a technical facility here to conduct R&D work on product design, testing and evaluation. Thailand, in fact, is the only country outside of the 30-nation Organisation for Economic Cooperation and Development in which Toyota has such sophisticated facilities. Promising investment site With many of the world's leading automakers manufacturing here and the economy rebounding, the country's automotive industry is expected to continue to expand in the future. Consequently, demand for locally produced auto parts will increase, presenting opportunities to investors. Geography is also a benefit of investing in Thailand. A gateway to Asia, Thailand provides easy access to regional markets. The country's many FTAs include terms advantageous to local auto parts producers. In particular, the agreement with ASEAN opens the door to a collective market of 585 million people in the association's member nations. Auto parts exported to ASEAN nations are currently subject to a tariff of less than 5%, and the tariff will be eliminated entirely in 2010. Thailand's FTA with Australia calls for the elimination of tariffs on commercial vehicles, passenger cars, and their parts and accessories in 2010. The Early Harvest Scheme with India provides for lifting tariffs on hydraulic systems, speedometers and gear boxes next year as well. The Thailand-Japan Economic Partnership Agreement increases the market potential for local parts producers. Under the JTEPA, tariffs on all but five automotive parts will be lifted by 2012. The Thai people are a plus as well, as the country boasts a skilled workforce. Labour costs here are lower than in many other areas of Asia. The land and facility costs are also competitive. Moreover, the government is encouraging the development of socalled auto parts clusters, where proximity between manufacturers and suppliers will result in further cost and efficiency benefits. There are also many industrial estates that focus on the automotive industry and provide state-of-art facilities for manufacturers. Exporting automotive parts in Thailand is a breeze with the country's extensive road networks, well-developed seaports and several international airports. In addition to the policies on tax reduction, there are nontax incentives that the Thai government offers to manufacturers of vehicles and vehicle parts, and for automotive R&D and testing. These include land ownership rights for foreign investors, permission to bring in foreign experts and technicians, and work permit and visa facilitation for expatriate employees. As additional assistance, the BOI provides the Unit for Industrial Linkage Development and also maintains the ASEAN Supporting Industry Database, a comprehensive online database of more than 20,000 ASEAN suppliers.(adidas