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(Last updated: 31 Jul 2007)
Trends and opportunities
The market
Thailand is becoming the world’s production base for one-tonne pickup trucks outside USA. Major automobile manufacturers such as Toyota, Ford-Mazda, Honda, Mitsubishi, General Motors and Isuzu already export vehicles worldwide from Thailand.
In 2004, the export value of automobiles, engines and components increased to more than 202 billion baht, with year-on-year growth of 46 per cent.
There were 332,053 completely built-ups (CBUs) worth 149.2 billion baht exported in 2004. The total export of CBUs in the first 10 months of 2005 was 361,462 units.
The Thailand Automotive Institute provides detailed information on industry figures.
Opportunities
The automotive parts manufacturing sector in Thailand is considered to be the most capable in South East Asia, with the local supply of almost 100 per cent of pick-up truck components and 60 per cent of passenger car components. However, local capacity to design and produce high technology parts is limited and opportunities exist in following areas:
- engine components
- electronic and electrical parts
- engineering plastic compounding
- large injection moulds
- press dies, jigs and fixtures
- design and engineering services
- product testing
- equipment maintenance and refurbishment
- aftermarket products
The shifting of research and development responsibility to parts manufacturers (as a cost-saving strategy) and the drive for export-level quality improvement creates opportunities for Australian parts manufacturers to offer technical expertise, and engage in joint ventures with Thai partners in the engineering aspect of original equipment manufacturing (OEM). This is especially the case for pick-up trucks (more than 60 per cent of the total Thai vehicle sector) and small passenger vehicles (30 per cent).
Vehicle manufacturers are aiming to increase the percentage of local contents and to have zero parts inventory, eg. Toyota has relocated its global light commercial vehicles’ production base from Japan to Thailand. Toyota’s target is to source 100 per cent of components within Thailand and ASEAN countries in the next few years. As a result, Toyota’s supplier base from Japan is locating its operations to Thailand. To supply OEM parts, Australian manufacturers should consider setting up manufacturing facilities in Thailand.
Competitive environment
Australia is perceived as a country with a strong automotive industry that produces quality products with high technology similar to other European countries and USA. The problem facing Australian parts suppliers in this sector is obtaining approval from the Japanese and American headquarters of car manufacturers:
- The original equipment manufacturing market is approximately 90 per cent dominated by Japanese or Japanese-affiliated companies.
- Import of automotive parts from Japan accounts for up to 75 per cent of total imports, followed by Germany with 11 per cent.
There are over 1800 automotive parts suppliers in the country including OEM and replacement equipment manufacturing (REM). The major local parts produced include:
- radio broadcasting receivers
- lighting and signalling equipments
- diesel and motorcycle engines and parts
- brake systems
- radiators
- diesel engines
- batteries
- steering systems
- suspensions
- transmissions
- safety parts
- body parts
- electronic parts
- interior/exterior parts
- tyres
- plastic parts
- glass
- accessories
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Tariffs, regulations and customs
In January 2000, the Thai Government imposed a higher import tariff (from 20 per cent to 33 per cent) on completely knocked down (CKD) components due to the local content requirement being abolished. However, under the Thailand–Australia Free Trade Agreement (TAFTA) any given components, CKD kits and completely built-ups (CBU) that reach a minimum of Thailand or Australia’s content requirement of 40 per cent, will be subject to tariff reduction.
The import duties of 80 per cent and 60 per cent on Cost Insurance Freight (CIF) value are applied to CBU cars and pick-up trucks respectively.
Duties are compounded by other taxes, including excise taxes, which vary between vehicle types – starting at three per cent for pickup trucks and rise to 50 per cent for large passenger cars, interior taxes at 10 per cent of the excise taxes, and value added tax (VAT) at seven per cent.
Industry standards
The industrial quality standard has become increasingly important as the Thai automotive industry focuses on expanding the export market. Vehicle manufacturers require parts suppliers to achieve ISO9001.
There are also standards that applied to specific parts, especially parts that are related to driver and passenger safety. The Thailand Industrial Standard Institute is the government body responsible for setting and controlling standards of automobiles and parts – particularly emission and safety standards.
The emission standard required for motor vehicles is Euro III. There is an issue that the Thai automotive industry's standards, especially for parts, are based on the European system, while Australia is using a different standard system for some areas.
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Marketing your products and services
Market entry
New entrants into the Thai automotive industry require in most cases a partnership with either the assembler, or with an existing parts supplier. The most efficient way for foreign firms to enter Thailand is through joint ventures with wholly-owned Thai companies.
Distribution channels
To market original equipment manufactured (OEM) products, suppliers need direct contact with car manufacturers. As every car manufacturers are using global sourcing policy in order to increase efficiency in parts sourcing and to gain negotiation power with parts manufacturers, relationships with the car manufacturer’s parent companies would be an advantage in securing contracts. In most cases, the OEM parts sourcing needs involvement from car company headquarters in Japan, Germany or USA.
For aftermarket products, original packaging from Australia is regarded as premium and can command a higher price. Aftermarket products should be distributed through parts distributors, car dealers and accessories shops rather than car manufacturers.
Selling aftermarket parts to car manufacturers is somewhat difficult unless the parts maker is the same maker as that of OEM parts, since every part sold through car companies will be involved with the warranty condition of the car. However, there is a possibility to supply car accessories that are not replacement parts to car companies’ Parts and Accessories Division.
The options for marketing aftermarket parts and accessories are to:
- Appoint a local sole agent/distributor who distributes to sub-distributors or retailers
- Import through big and medium-size local parts importers
Transport
The original equipment manufactured parts are normally supplied direct to car assemblers as they involve special import clearance to be done by the assemblers themselves.
Most aftermarket products and equipment are shipped by sea freight:
- Shipping time from Australia to Thailand takes two weeks
- Shipping frequencies are twice weekly from major Australian ports such as in Melbourne
- Lam Chabang is the destination port for most automotive products
It is recommended that you use a customs broker or agent to clear the goods from customs. Your local agent or distributor usually handles the import procedures and documentation. It is a requirement that all import procedures be completed by a Thai registered company.
Payment is usually by irrevocable letter of credit.
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Contact details
The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.
Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.
Austrade:
- Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
- Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
- Administers the Export Market Development Grants scheme.
- Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
- Provides advice to the Australian Government on its trade and investment development activities.
- Delivers consular, passport and other government services in designated overseas locations.
A list of Austrade offices (in alphabetical order of country) is available.
More information
For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au |
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