Region/Countries: Asia, Thailand Industry: Manufacturing, Other Date: June 2018

Why this is important to Wisconsin businesses: Wisconsin auto parts suppliers can serve the large and growing market, which is shifting its focus to green automotive production.

Thailand is the largest automotive producer in southeast Asia—and the 12th in the world—with the Thai government having been actively involved in propelling the local industry's success for the last 50 years. With a value of $27 billion in 2016, the automotive industry contributes around 12 percent of Thailand's GDP, according to the Thailand Board of Investment.

The country's car production is comparable to that of France and Canada, recording a yearly average of almost 2 million units and a 4 percent growth rate between 2015 and 2017. About 40 percent of this volume goes to the production of passenger cars and around 60 percent to commercial vehicles, particularly one-ton pickups (Thailand is the world's second-largest manufacturer of pickup trucks). The country has also set an ambitious goal to increase its car production by 80 percent, or by 3.5 million vehicle units, by 2020. Meanwhile, motorcycle production has also averaged close to 2 million units between 2015 and 2017, posting a remarkable growth rate of 14 percent, according to the Thai Automotive Industry Association. Aside from robust domestic demand, Thailand is also a major automotive exporter, mainly to Australia, the Philippines and Indonesia.

Since the 1960s, major global automotive manufacturers from Japan, Europe, the U.S. and China (e.g., Honda, Toyota, Nissan, Ford, GM, Mercedes-Benz, Tata, VW, Volvo), have opened production plants and regional headquarters in Thailand. Moreover, the country was also able to establish its own automotive brand, Thai Rung. According to the Thailand Board of Investment, the country has 18 car companies and nine motorcycle companies engaged in assembly. In turn, the presence of assemblers has attracted 710 auto parts companies (Tier 1 suppliers) and more than 1,700 Tier 2 and 3 suppliers to compete for the Thai supply chain. Local auto parts manufacturers supply 80 to 90 percent of the parts used in domestic auto vehicle production. Notably, more than 60 percent of the 100 largest auto-parts suppliers in the world have their production hubs in Thailand.

To remain globally competitive and environmentally sustainable, Thailand aims to be a global green automotive production base by 2021. As a result, the supply of eco-cars, plug-in hybrid electric vehicles and electric vehicles is emerging as a new trend. With the implementation of the carbon dioxide-based excise duty on vehicles, domestic sales of environmentally friendly vehicles in Thailand jumped from around 2 percent of the total in 2010 to 15 percent in 2016, a number that is expected to grow further to 25 percent before 2020.

While the Thai automotive market is large, Wisconsin auto parts suppliers should also note that there is intense competition from well-entrenched Japanese competitors. According to the International Trade Centre (ITC) Trade Map for 2017, Thailand’s imports of HS Code 87 (vehicles, except railway or tramway, and parts, etc.) reached a total of $9 billion, 37 percent of which came from Japan and 7 percent from U.S.-based suppliers. With Thailand being part of the ASEAN-Japan Comprehensive Economic Partnership, Japanese companies also enjoy reduced tariffs for automotive products. ITC Trade Map’s estimated average tariff for HS Code 87 applied by Thailand is only 28.5 percent for Japan, compared to 41 percent for the U.S. However, there are still very good opportunities for the U.S. manufacturers to export to Thailand, especially now that the country is promoting next-generation vehicles. In general, the following solutions are considered key contributors to the next-generation vehicle fuel and energy efficiency, enhanced quality and safety markets:

  • Automotive electronics: Most of the electronics used in automotive production in Thailand are imported from Malaysia and Japan, according to in Vietnam. Some of these components include electronic fuel injection systems, substrates for catalytic converters, CVTs, electronic stability controls, and regenerative braking systems.
  • Eco-car parts: To promote the production and usage of eco-cars, the Thai government continues to provide incentives for eco-parts, particularly materials that cannot be produced in Thailand.
  • Natural gas vehicle control system and components: Aside from the introduction of over 10,000 natural gas-powered taxicabs and natural gas subsidization, Thailand has also reduced import duties on natural gas vehicle tanks and control system parts and components.
  • E85: The Thai government provides an exemption on import duties of automotive parts that are used to make vehicles E85 fuel-ready, as well as an excise tax reduction on cars that already use E85.
  • Advanced equipment and tools for metal cutting and metal processing
  • Products and services for efficient aftermarket vehicle-servicing
  • Products and services for R&D, design and testing centers, catering to the vehicle efficiency market