Thailand Detroit of Asia By Mr

Thailand : Detroit of Asia By. . Mr. Ninnart Chaithirapinyo Vice Chairman The Federation of Thai Industries Toyota Motor Thailand

Today’s topic I. Where are we? II. Where will we go? III. How will we go? IV. Why Thailand?

I. Where are we?

1. 1 Circumstance Change in Market Topics Auto Policy by Government Movement of Automotive Industry ’ 70 ’ 90 • Local content regulations • Ban for CBU vehicle import ’ 05 • Deregulation of Local content • Tariff reduction ‘ 10 • Free competition 25% local Increase of Abolishment AFTA Tariff FTA Content local of local reduction Negotiation requirement content to 50% content to 0% Regulation Car Manufacturer Trend ’ 00 Vehicle Assembly Deregulation Asian Car Liberalization Higher competition Global Car Country Competition Regional Competition Global Competition

1. 2 PRODUCTION CAPACITY IN 2005 Company 1. TOYOTA 2. ISUZU PC 200, 000 4. AUTO ALLIANCE (Ford& Mazda) 5. HONDA CV TOTAL 200, 000 50, 000 450, 000 180, 000 200, 000 50, 000 100, 000 20, 200 170, 200 2, 700 132, 300 - 3. MITSUBISHI 1 TON P/U 120, 000 - 135, 000 - - 120, 000 6. GENERAL MOTOR 20, 000 95, 000 - 115, 000 6. NISSAN 33, 200 66, 400 2, 400 102, 000 28, 800 8. HINO - - 9. DAIMLERCHRYSLER 16, 300 - - 16, 300 10. YMC Assembly 12, 000 - - 12, 000 11. BMW. 10, 000 - - 10, 000 12. VOLVO 10, 000 - - 10, 000 TOTAL 474, 200 773, 700 121, 200 1, 369, 100

1. 3 Market ratio P/U Ratio = 58% Local Content = 80 -90% P/C Ratio = 33% Local Content = 30 -70%

1. 4 Industry structure Foreign Joint Venture LEs Pure Thai 354 Foreign Majority 287 Thai Majority 68 Assemblers 12 Companies Tier 1 709 Companies SMEs Tier 2&3 LOCAL SUPPLIERS 1, 000 Companies

Contribution of Auto Industry to Thai Economy Auto Industry GDP Auto Industry EMPLOYMENT Manufacturing Sector

Unit 1. 5 Production, Domestic sales and Exports

1. 6 Thai Export Value Million US$ )Ranking compared with other products( 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

1. 7 World Productions & Sales Ranking in 2004 Country NO. Productions NO. Sales U. S. A. 1 11, 907, 588 1 17, 294, 805 JAPAN 2 10, 515, 698 2 5, 844, 327 GERMANY 3 5, 530, 129 4 3, 563, 860 CHINA 4 5, 056, 715 3 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 7 2, 473, 312 CANADA 8 2, 669, 961 10 1, 575, 590 BRAZIL 9 2, 206, 189 9 1, 578, 775 UK 10 1, 856, 057 5 2, 957, 200 MEXICO 11 1, 567, 337 13 1, 114, 099 INDIA 12 1, 511, 171 12 1, 343, 779 RUSSIA 13 1, 392, 646 11 1, 376, 273 ITALY 14 1, 060, 171 6 2, 522, 737 THAILAND 15 928, 081 17 626, 026 TURKEY 16 820, 135 16 757, 092 In 2005 Thailand will rank No. 14 in Production and No. 17 in Domestic sale and will celebrate One Million Productions in December

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 50, 000 HONDA 40, 000 OTHERS 30, 000 TOTAL 500, 000

II. Where will we go?

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 Being the production base of OEM and REM parts

III. How to go?

3. 1 AHRDP )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) )Joint project among Jetro, JCC, TAI, FTI(

3. 2 R&D and Training Fund SOURCE OF FUND 90% • CAR ASSEMBLERS • PART MAKERS Car assemblers withdraw for • Oversea & Domestic training • Scholarship • R&D TRAINING FUND 100% 10% SMEs withdraw for • Training • R&D and Training fund will be managed by term committee

3. 3 Free Trade Agreements To expand additional market INDIA CHINA )Pop~ 1, 000 million( 1, 300 million( PERU )Pop~ 28 million BAHRAIN AUSTRALIA )Pop 0. 9 million) )Pop ~ 20 million) THAILAND )Pop ~ 64. 8 million) AFTA NEWZEALAND )Pop ~ 500 million) )Pop ~ 4 million) JAPAN BIMSTEC )Pop~127 million) AMERICA )Pop~292 million)

3. 3 Free Trade Agreement : Australian Tariff Reduction 10 % increase In export Tariff reduction Ta rif fr ed uc tio n 30 % increase in export

The opportunities for Automotive Industry I. Enhancing trade in vehicles 1. The Australian and Thai vehicles are complementary. There are global platform similarities and both use the right hand drive format. 2. Thailand is a centre for light commercial vehicles production (Detroit of Asia). 3. Australia has a competitive advantage in large car production. 4. The trade expansion would be expected to affluent rise as a result of the tariff reduction.

The opportunities for Automotive Industry II. Enhancing trade in Auto components 1. There will be trade exposure potential for exports and sales under TAFTA. 2. Improving the economies of scale via production increases as well as cost reduction from cheaper raw material ex: steel, copper, aluminum etc.

The opportunities for Automotive Industry III. Enhancing in Services and Investment 1. Enhancing in the service in the area of training, technology transfer, Design & Engineering Alliance, Mold & Die making or plastic injection , etc. 2. Labor and services are able to move easier under the TAFTA. Leading to export engineering, design and technical expertise. 3. There are motor vehicle service, repair opportunities in the aftermarket sector and also auto part reconditioning. 4. BOI offers more privilege for the auto industry.

Japan-Thailand Economic Partnership Agreement I. Automobiles 2005 Passenger car Exceed 3, 000 cc. Passenger car less than 3, 000 cc. 80% 2006 75% 2007 70% 2008 65% 2009 60% Renegotiation will commence on a date to be agreed upon before signing A political declaration on automobile will be issued at the time of signing JTEPA

Japan-Thailand Economic Partnership Agreement II. Auto parts Tariff over 20% The tariff rate will be reduced to 20% and maintained before eliminate in 2011 Tariff at 20% and below The tariff rate will be maintained and eliminated in 2011 Sensitive (5 items) The tariff rate will be maintained and eliminated in 2013

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 11 th 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.

IV. Why’s Thailand

4. 1 Nine Government policies in 2005 1. Poverty Eradication Policy 2. Human development policy and quality of life 3. Economic restructuring policy to create equilibrium and competitiveness 4. Natural Resources and Environmental policy 5. Foreign policy and international economic policy 6. Policy on the development of the legal system and good governance 7. Policy to promote democracy and civil society process 8. National security policy 9. Policy according to directive principles of fundamental state policy

4 4. 2 Global Brands in Thailand < EUROPE< Citroen, Peugeot, Volkswagen , BMW, Volvo , Daimler ANNUAL PRODUCTION CAPACITY 1. 2 MILLION UNITS < USA< Ford + Asia Pacific HQs GM + Asia Pacific HQs Chrysler < JAPAN< Toyota+ R&D Center Honda + R&D Center Isuzu, Mitsubishi, Mazda, Hino, Nissan,

4. 3 Car ownership Possibility for expansion potential America 2 persons / unit Japan 2 persons / unit Malaysia 5 persons / unit Singapore 6 persons / unit Thailand 10 persons / unit Philippines 30 persons / unit Indonesia 60 persons / unit Vietnam 300 persons / unit

4. 4 Why Thailand ® Political stability ® liberalization policy Government ® Attractive government incentives ® Infrastructure Good & Massive infrastructure network ( Electricity , Telecommunication , Air ports , Ports )

4. 4 Why Thailand ® ® Large production base for pick up truck ® Market Considerable market size Gateway to 500 million people of ASEAN Rich pool of supporting industries ® Good access to raw materials ® Cheaper parts manufacturing cost ® Supplier

4. 4 Why Thailand ® Abundant People of quality labor forces ® Language proficiency ® Hospitality and friendly attitude ® Delicious Amenity foods and fruits ® Attractive tourist places ® Plenty of golf courses

4. 5 Low Cost & Competitive Market 1. Mirror Set 2. Glass set

4. 5 Low Cost & Competitive Market 3. Stamping part 4. Insulator Set

4. 5 Low Cost & Competitive Market 5. Rubber Set 6. Interior Set

4. 5 Low Cost & Competitive Market 7. Engine Set DIESEL GASOLINE

4. 6 Opportunity for Auto Industry INSUFFICIENT COMPONENTS PRODUCED IN THAILAND • • Opportunity to invest in Thailand!! • • • * New investment 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

4. 6 Opportunity for Auto Industry PARTS MANUFACTURERED IN THAILAND • • Engine - Diesels, Motorcycles Engine Components - Starters, Alternators, Pumps, • Body Parts - Chassis, Bumpers, Fenders, Hoods, Door Panels Brake Systems - Master Cylinders, Drums, Disc, Pads, Linings Steering Systems - Steering Wheels, Gears, Columns, Pumps, Linkages • • Filters, Hosed, Gears, Flywheels • • • 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

4. 6 Opportunity for Auto Industry POTENTIAL BUSINESS GROWTH FOR NEW/EXISTING INVESTORS BRIGHT FUTURE THAILAND GOVERNMENT PRODUCTION SUPPORT VOLUME INCREASE + + EFFORT OF THE 100% PRIVATE SECTOR LOCALIZATION

Vielen vielen Dank