SECTION [B] : SUCCESSES OF THAILAND'S AUTOMOTIVE INDUSTRY

Figure 1

Thailand's automotive industry has changed from being a sole importer of CBU vehicles to an assembling base. During the early localisation phase, Thailand succeeded in reducing the imports of CBU vehicles while increasing assembling activities using CKD kits, with the CKD:CBU ratio of 13:87, at the beginning, rising to 80:20 in 1978. Today, Thailand is more than a vehicle assembler. Thailand is starting to manufacture her own auto parts and components. The country has also become a major export base. In the early 1990s, before the impact of the liberalisation process really took full force, vehicles needed to be imported to meet domestic demand. After the recovery from the 1997 crisis, local vehicle production began to pick up drastically, and Thailand began exporting vehicles and auto parts, as shown in Figure 1. On the production side, the figure has increased from 111,037 units in 1984 to 1.1 million in 2005. In 1998, 14,965 vehicles were exported. By 2005, 421,911 units were exported. The total exports of vehicles and parts have skyrocketed tremendously from Baht 6,296 mln in 1996 to an astounding Baht 294,248 mln in 2005. The exports of original equipment manufacturing (OEM) parts alone have surged from Baht 976 mln in 1996 to Baht 76,791 mln in 2005, as can be seen in Figure 2.

Figure 2

The most popular type of automobile in the Thai market is the one-ton pickup truck, where its sales account for more than half of the overall auto market. Japanese-made automobiles have dominated the local auto market, with nearly a 90% market share, with Toyota, Isuzu, Nissan, Mitsubishi, Honda and Mazda as the best selling automobiles. On the parts manufacturing side, locally produced parts include brakes, propeller shafts, steering systems, body parts, air conditioning, tires, wheels, glass, suspension controls, and springs. With over 700 OEM parts suppliers and 1000 supporting industries, Thailand is on its way to become a strong supply base.

Thailand has attracted many major foreign carmakers to invest in the country, paving the way for Thailand to become the "Detroit of Asia". Mitsubishi is set to make Thailand as their major production base in ASEAN. Meanwhile, Honda Motor Co plans to add a production line to its Thai operations to build a new compact car due to start in 2007. Japan's third largest carmaker, the Nissan Group, also plans to increase its investment by relocating the production of pickup trucks to Thailand and exporting them around the world, thus making Thailand its export base. The German carmaker Audi is set to use Thailand as its production base, after China, for export markets in the region.

The new "Best Little Car" project by the government is hoped to be a benefit to manufacturers and consumers. A whole new segment would be created, which would bring in new production lines and more domestic sales. Under the project, tax incentives would be offered to encourage the production and sales of energy-efficient vehicles, while carmakers have urged the government to cut tariffs on imported hybrid cars. Also, a lower excise tax rate would make the models more affordable.