Automotive to Thailand

Trends and opportunities

The market

The automotive sector is Thailand’s third-largest industry. 2016 production was around 1.94 million motor vehicles (or 56 per cent of capacity), meaning Thailand has capacity to produce more then three million cars and trucks. It is the fifth-largest automotive manufacturer in Asia and twelfth globally (Source: International Organization of Motor Vehicle Manufacturers (OICA) )

There are 19 automotive and eight motorcycle manufacturers with facilities or assembly plants based in Bangkok and surrounding areas, Ayutthaya, plus the Eastern Seaboard (Rayong and Chonburi).

Major automobile manufacturers such as Toyota, Isuzu, Honda, Mitsubishi, Nissan and Ford currently export vehicles worldwide from Thailand. Japanese manufacturers account for over 85 per cent of Thailand’s vehicle sales. The most recent addition to vehicle manufacturing is the largest auto company on China's A-share market – the Chinese state-owned SAIC Motor – CP (manufactures MG cars).

Thailand specialises in pickups. It is the world’s second-largest producer behind the United States, and largest producer of one-tonne pickup trucks. Pickup trucks also make up the highest percentage of sales on the domestic market with Toyota Hilux, Isuzu D-Max and Ford Ranger the three top-selling vehicle models in Thailand.

While one-tonne pickups dominate Thailand’s domestic sales, smaller fuel-efficient eco cars (650 – 1500cc) is an emerging segment which has the highest market share of the sales within the sedan cars segment. Domestic sales account for 799,632 units, showing this to be a very export-oriented industry. (Source: Thailand Automotive Institute’s automotive statistics).

To encourage new manufacturing investment, the Office of the Board of Investment (BOI) offers tax and other incentives to car manufacturers to invest in electric vehicles and fuel efficient vehicles (eco cars). The focus of these incentives is aimed at electric vehicles (EV) including hybrid electric vehicles, plug-in hybrid electric vehicles and battery electric vehicles, EV components and charging stations. Toyota has submitted an investment application for production of hybrid vehicles , and other global car manufacturers have also expressed interest. These include BMW, Mercedez Benz, Nissan, FOMM and SAIC.

The Thai Government recently announced a ‘Thailand’s Automotive Industry 4.0’ strategy to strengthen the industry into the 21^st century, encouraging the sector to focus on innovation including the development of electric vehicle (EV) technology, the establishment of automotive and tyre-testing centers, and development of automotive industry ‘super clusters’ within the Eastern Seaboard Corridor provinces of Rayong, Chon Buri and Chachoengsao.

More than 520,000 employees work in Thailand’s automotive industry (Source: Thailand Automotive Institute Thailand Automotive Industry Situation and Master Plan) but the country still needs to address its skills base to improve national capability and competitiveness, especially in engineering and research and development (R&D), in order to maintain its position within the global automotive market.

Opportunities

The aftermarket is growing. More than 55 per cent of Thailand’s vehicles are older than five years. Key areas of demand are engine and crash repair, maintenance and accessories, key products such as starter motors and alternators, radiators and fans, compressors, brakes, clutches, wipers, suspension parts and lubricants.

The off-road and four-wheel-drive (4WD) segment continues to grow, generating demand for 4WD vehicle accessories, suspension parts, high performance products and recovery equipment.

Due to a limited local ability in Thailand to design and produce high-tech parts, combined with a shift of R&D into parts manufacturers (as a cost-saving strategy) and a drive for quality improvement, there are opportunities for high technology parts manufactured in Australia such as electrical components and R&D activities.

Australian automotive component manufacturers can participate in the Thai industry through offering technical expertise, engaging with local component manufacturers, or through investing in an Original Equipment Manufacturing (OEM) facility. Investing locally to manufacture, which ensures price competitiveness as well as closeness to the supply chain, will increase chances of success.

Vehicle Manufacture – Automotive OEM Market : Australian companies find direct supply to Japanese OEMs in Thailand extremely difficult and companies normally supply via Tier 1 or Tier 2 suppliers.

Aftermarket segment: Australian replacement parts automotive aftermarket product manufacturers can sell to OEM car manufacturers’ Parts and Accessories (P&A) divisions in order to supply aftermarket parts, which is a much less complicated sourcing process than original components. Australian 4WD equipment and accessories are well recognised in Thailand. Many leading Australian brands have successfully penetrated the market. Australian suppliers of 4WD equipment and accessories may consider approaching importers of relevant products or vehicle modifiers to access the market.

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 more than 60 per cent of passenger car components.

Although major R&D on vehicles remains based at the headquarters of car manufacturers, Honda, Toyota and Nissan Motor Asia Pacific (NMAP) have recently established regional R&D and testing centers in Thailand.

The potential establishment of an ASEAN Economic Community (AEC) is expected to offer significant opportunities for automotive aftermarket products including 4WD equipment, suspension parts and performance upgrading products.

Competitive environment

Australia is perceived to supply products and services of a similar quality to many European countries and the US. However, barriers exist to accessing the market such as the requirement to obtain approval from headquarters of car manufacturers.

• Japanese or affiliated companies dominate the OEM market with 90 per cent of the market.
• Automotive parts imported from Japan account for 46.8 per cent of total imports, followed by China with a 12.5 per cent share. (Source: The Royal Thai Customs)

There are over 1800 automotive parts suppliers in Thailand, including OEM and Replacement Equipment Manufacturing (REM). Major local parts produced include: radio broadcasting receivers, lighting and signaling equipment, diesel and motorcycle engines and parts, brake systems, radiators, batteries, steering systems and suspensions, transmissions, safety and body parts, electronic parts, interior/exterior parts, tyres, plastic parts, glass and accessories (Source: ASEAN Supporting Industry Database)

Tariffs, Regulations and Customs

There is no local content requirement on motor vehicles manufactured in Thailand. Import duties on Completely Knocked Down (CKD) components are from 10 to 30 per cent on Cost, Insurance and Freight (CIF) value depended on type of vehicles, while duties between 80 and 40 per cent on CIF value are applied to Completely Built Unit (CBU) cars and trucks respectively.

However, under the Thailand–Australia Free Trade Agreement (TAFTA), any given components, CKD kits and CBUs that reach a minimum of Thailand or Australia’s content requirement of 40 per cent, will be subject to tariff reduction or zero import duties.

Duties are compounded by other taxes:

• the new excise tax structure has been in effect since January 2016. The excise tax rates vary between vehicle types based on Carbon Dioxide (CO ₂) levels and engine displacement size: 3 per cent for a single cab pick-up truck with CO₂ levels of less than 200 gram/kilometre, rising to 50 per cent for large passenger sedans (Source: Thailand Automotive Institute )
• interior taxes at 10 per cent of the excise taxes
• Value Added Tax (VAT) at 7 per cent

(Source: Department of Foreign Affairs and Trade )

Industry standards

Production quality is increasingly important as the Thai auto sector focuses on building exports. Vehicle manufacturers require that parts suppliers achieve ISO9001 and/or ISO14001.

There are also standards that apply to specific parts, especially those related to driver and passenger safety. The Thai Industrial Standards Institute is the government body responsible for setting and controlling standards of automobiles and parts – particularly emission and safety standards. The Pollution Control Department (PCD) is responsible for air quality and noise standards.

Currently, passenger cars and light commercial vehicles in Thailand are required to meet Euro-IV emission standards, however vehicles under Eco Car Program Phase two will need to achieve Euro-V emission standards (Source: Board of Investment (BOI), Thailand) .

• Australian suppliers should note Thailand’s automotive industry's standards, especially for parts, are based on the European system which can differ to Australian standards.

Marketing your products and services

Market entry

In most cases, new entrants to Thailand’s auto industry requires partnership with either assemblers or an existing parts suppliers. Foreign firms can enter Thailand through joint venture with wholly-owned Thai companies - or hold 100 per cent ownership if approved by the BOI.

Distribution channels

To market OEM products, suppliers need direct contact with car manufacturers’ headquarters or regional offices in Japan, Germany, the US, etc.

A relationship with a car manufacturer’s parent company is an advantage in securing contracts, as all use global or regional sourcing policies to increase efficiency and to maintain negotiation power with parts manufacturers.

Distribution channels for Thailand’s automotive aftermarket products are well structured. The products are distributed through such channels as:

• parts and accessories divisions of car companies
• authorised car dealers
• independent repair centres
• importers and wholesalers
• retailers and fast-fit service chains.

The original packaging of automotive aftermarket products from Australia is regarded as premium and can command a higher but reasonable price.

Selling aftermarket parts to car manufacturers, especially safety related parts, is somewhat difficult unless the parts maker is the same maker as that of OEM parts (as all parts sold through car companies are included in warranty). However, it is possible 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 can supply to sub-distributors or retailers
• to import through big and medium-sized local parts importers.

Transport and logistics to the market

OEM parts are normally supplied direct to car assemblers as they may involve special import clearance.

Most aftermarket products and equipment are shipped by sea freight:

• The shipping time from Australia to Thailand takes approximately two weeks
• Shipping frequencies are twice weekly from major Australian ports
• Lam Chabang is the destination port for most automotive products

It is recommended exporters use a customs broker or agent to clear goods from the customs. Your local agent or distributor usually handles the import procedures and documentation, as it is a requirement that all import procedures be completed by a Thai registered company.

To claim benefits of import duty reductions under TAFTA, Australian suppliers need to obtain a Certificate of Origin from Australia, to present to the Customs in Thailand.

Payment is usually made by irrevocable letter of credit.

It is advisable to investigate a variety of service providers.

Links and industry contacts

Government, business and trade

FTA Portal
ASEAN Database 
Australian Embassy Bangkok 
Australian-Thai Chamber of Commerce 
Ministry of Commerce
Ministry of Foreign Affairs 
Royal Thai Customs Department 
Society of Automotive Engineers Thailand 
Stock Exchange of Thailand 
Thai Auto-Parts Manufacturers Association (TAPMA) 
Thai Automotive Industry Association (TAIA) 
Thai Chamber of Commerce 
Thailand Board of Investment
Thai Tool and Die Industry Association 
Thailand Automotive Institute 
Tourism Authority of Thailand
World Trade Organization

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
• strengthen Australia's tourism industry
• seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.