1. Updated Information on Trade and Investment Opportunities in Thailand: Automotive Industry Part 2 Ms.Nattinee Netraumpai Assistant Director Thailand Board of Investment, Frankfurt Office

2. Investment Opportunities for Automotive and Supplier Industries

3. USA Imports: 330,663 Exports: 662,741 China Imports: 564,591 Exports: 510,756 ASEAN Imports: 872,365 Exports: 1,119,956 EU Imports: 403,243 Exports:672,824 Japan Imports: 988,536 Exports: 625,061 Australia Imports: 132,191 Exports: 197,516 Hong Kong Imports: 50,147 Exports: 298,955 Korea Imports: 184,223 Exports: 102,298 Major Trade Partners in 2007 unit: million Baht Source: MOC

4. Thailand’s FTA Thailand-Japan FTA (under implementation) JAPAN : 128 million population ASEAN-Japan FTA KOREA: 48 million population ASEAN-Korea FTA ( Under Negotiation) ASEAN: 550 million population AFTA NEW ZEALAND : 4 million population ASEAN-New Zealand FTA ( Under Negotiation) AUSTRALIA : 20 million population ASEAN-Australia FTA ( Under Negotiation) INDIA : 1.1 billion population ASEAN-India FTA (Under Negotiation) CHINA: 1.3 billion population ASEAN-China FTA ( Under Negotiation) ASEAN-EU FTA ( Under Negotiation) Thailand-India FTA (Under negotiation) PERU: 28 million population Thailand-Peru FTA (under implementation) Thailand – Australia FTA TAFTA (implemented) Bilateral Thailand – NZ FTA (implemented) Thailand-EFTA: 13.5 million population ( Norway, Iceland, Switzerland and Liechtenstein). (Under Negotiation) BIMSTEC: 1.4 billion population (India, Burma, Sri Lanka,Thailand, Nepal, Bhutan, Bangladesh) (Under Negotiation) US : 300 million population Thailand-USA FTA (Under Negotiation) Multilateral Effective Date: Thailand-China: October 2003 ASEAN-Australia-NZ: Will be implemented in late 2008 Thailand-India: Early harvest Sept 1, 2004 ASEAN-EU: Negotiations began in 2003 Thialand-India FTA: Late 2008 early 2009 will be implemented ASEAN-Korea: Aug 2006 Thailand-Japan: April 3, 2007 ASEAN-India: Will be signed in Dec; put into effect in early 2009 Thailand-Korea: Concluded negotiations in Jan 2008 ASEAN-Japan: Implemented late 2008 Thailand-Peru: Implemented in Nov 2008 ASEAN-China: July 1,2005 Thailand-US: Negotiations began in 2003 AFTA: July 1, 2003 Thailand-EFTA: Negotiations began in May 2005 TAFTA: Jan 1, 2005 Thailand-NZ: July 1, 2005 BIMSTEC: Negotiations on goods concluded in 2005 for implementation in 2006 Negotiations on service: investment; concluded in 2007

5. Cambodia Imports: 1,689 Exports: 46,718 Laos Imports: 16,296 Exports: 45,208 Philippines Imports: 74,630 Exports: 99,965 Indonesia Imports: 138,551 Exports: 164,228 Brunei Imports: 3,900 Exports: 3,134 Singapore Imports: 218,708 Exports: 328,169 Malaysia Imports: 299,903 Exports: 268,614 Myanmar Imports: 80,031 Exports: 33,064 Vietnam Imports: 38,655 Exports: 130,856 Source: MOC Thailand – ASEAN Trade in 2007 unit: million Baht

6. Thailand-ASEAN Trade Source: Bank of Thailand, as of June 25, 2008

7. ASEAN Economies as a Potential Single Market CountryPopula tion (millio n) GDP current price (billion US$) GDP per Capita (US$) GDP Growt h (%) Total Trade (billion US$) Indonesia 222.05 5.61,640 5.6 161.86 Malaysia 26.695.95,8805.9285.54 The Philippine s 86.91 5.31,351 5.399.18 Singapor e 4.84 7.929,499 7.9510.09 Thailand 65.235.03,1675.0248.69 Vietnam 84.208.27248.277.27 ASEAN567.566.01,8906.0 1,404. 81

8. Pure Thai 23 % SME s Foreign J/V Foreign Majority 47 %. Local Suppliers Tier 1 LSE s (Total 648 Companies) Thai Majority 30 % [* LSEs : Large Scale Enterprises SMEs : Small & Medium Enterprises] The data updated in January 2005 by TAI (Car 16 Companies, Motorcycle 7 Companies) (1,641 Companies ) Tier 2,3 Assemble r Structure of Thai Automotive Industry

9. MAPPING OF AUTO-ASSEMBLERS Ayudhaya - Honda Automobile (Thailand) Bangkok -Thai Honda Manufacturing (MC) Cholburi - Mitsubishi Motors Thailand Pathumthani - Thai Suzuki Motor (MC) Samutprakarn - Toyota Motor Thailand - Isuzu Motors (Thailand) - Siam Nissan Automobile - Thai Yamaha Motor (MC) - Tiger Motor (MC) - Thai Swedish Assembly - Thonburi Automotive Assembly - Hino Motors (Thailand) Rayong - Auto Alliance (Thailand) - General Motors (Thailand) - BMW Manufacturing (Thailand) - Kawasaki Motors Enterprise (Thailand) (MC) Chachoengsao -Toyota Motor Thailand (2 Plants) -Triumph Motorcycle (MC)

10. 98% Exported at Laem Chabang Port-LCP Source: Port Authority Thailand, Dr.Siri Jirapongphan Automotive Assemblers in Thailand

11. PRINCIPAL AUTO PARTS PRODUCTION SITES Pathumthani Total suppliers: 39 Body Parts: 18%, Engine Parts; Electrical Parts: 13% each, Suspension & Brake Parts: 10%, Drive, Transmission &Steering Parts; Accessories: 8% each, Other: 31% Bangkok Total suppliers: 232 Body Parts: 9%, Engine Parts; Electrical Parts; Drive, Transmission &Steering Parts; Accessories: 6% each, Suspension & Brake Parts: 4%, Mold&Die: 3%, Other: 60% Samutprakarn Total suppliers: 158 Body Parts: 22%, Electrical Parts: 15%, Engine Parts; Drive, Transmission &Steering Parts: 8% each, Suspension & Brake Parts: 5%, Mold&Die: 4%, Accessories: 3%, Other: 36% Rayong Total suppliers: 41 Body Parts: 24%, Engine Parts; Drive, Transmission &Steering Parts: 15% each, Suspension & Brake Parts: 12%, Electrical Parts: 10%, Accessories: 7%, Mold&Die: 2%, Other: 15% Chonburi Total suppliers: 55 Body Parts: 25%, Engine Parts: 22%, Drive, Transmission &Steering Parts: 15%, Electrical Parts: 9%, Accessories: 5%, Suspension & Brake Parts: 4%, Mold&Die: 4%, Other: 16%

12. Engines Diesels, Motorcycles Engine Components Starters, Alternators, Pumps, Filters, Hoses, Gears, Flywheels Body Parts Chassis, Bumpers, Fenders, Hoods, Door Panels Brake Systems Master Cylinders, Drums, Discs, Pads, Linings, Steering Systems Steering Wheels, Gears, Columns, Pumps, Linkages Suspensions Shocks, Coils, Ball Joints Transmissions Gears, Casings, Rear Axles, Drive Shafts, Propellor Shafts Electrical/Electronics Alternators, Starters, Speedometers, Lamps, Motors, Flasher Relays Interiors/Exteriors Seats, Mats, Weather Strips, Console Boxes Others Windshields, Seat Belts, Radiators, Wheels, Compressors Parts Manufactured in Thailand

13. Major Steel Makers in Thailand Sahaviriya Steel Siam Steel Nippon Steel JFE Steel ArcelorMittal Steel Baosteel TATA Steel

14. Current Demand in Automotive Industry

15. 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 NGV Equipment  target: 99,000 NGVs by 2008 Opportunities: Components not Sufficiently Produced in Thailand

16. Business Opportunities for Automotive Electronics

17. World OEM Automotive Electronics Demand * Estimated. Source: The Freedonia Group. 200120062011* % Annual Growth 2001-20062006-2011* North America22.930.141.25.66.5 Western Europe2328.836.34.64.8 Asia-Pacific19.836.355.412.98.8 Others4.411.22920.812.3 Global demand70106.3152.88.77.5

18. Asia-Pacific OEM automotive electronics demand, 1996-2016* * Estimated Source: The Freedonia Group.

19. Distribution of Thailand’s Tier-1 Automotive Suppliers Company TypeChassisPowertrainElectrical/ Electronic BodyOthers Pure Thai 5 12 4 14 41 Majority Thai 10 11 12 10 29 Majority Foreign 33 31 9 50 Wholly Foreign-Owned 17 18 7 12 25 Source: Company information; Thai Automotive Institute; Thai Department of Business Development; and SVI Public Co., Ltd.

20. Thailand’s OEM Automotive Electronics Demand, 1996-2016 * Value in USD. ** Value in millions of USD. *** Estimated. Source: The Freedonia Group. Item19962001200620112016 *** Value of electronics used per vehicle*4356301,0091,2881,716 OEM auto electronics demand**1962581,1502,1833,500 - Engines and drivetrains1001335001,0001,542 - Safety and security products4250292542917 - Comfort, convenience and entertainment products 2942233417667 - Navigation and instrumentation2533125225375 - Percentage of products sold to Thai conumers11344 Asia Pacific OEM auto electronics demand**12,79616,50030,20846,12566,750

21. Thailand’s Automotive Electronics Technology Road Map Source: Thailand Embedded Systems Association.

22. Thailand’s Automotive Electronics: Strengths Growing consumer demand for automobiles, particularly those with high-technology components Strong presence of automotive OEM manufacturers Existing car assembly bases and R&D centers Strong disc drive and integrated circuit industry Relative ease of doing business Strong governmental support: incentives for automotive, high-technology and R&D investors; promotion of a knowledge-based society; supporting organizations Source: Thailand Sectoral Study Report: Automotive Electronics by Tractus (Thailand) Co., Ltd.

23. Thailand’s Automotive Electronics: Opportunities Growth of the automotive sector, particularly within the Asian region Increasing demand for cars with advanced electronics systems Emissions regulations and move towards a fuel-efficient economy Improved safety standards Growth of automotive entertainment electronics sector FTAs Special BOI incentives for select automotive electronics activities Source: Thailand Sectoral Study Report: Automotive Electronics by Tractus (Thailand) Co., Ltd.

24. BOI Incentives and Outsourcing Services

25. No export requirements No foreign equity restrictions in manufacturing sectors No local content requirements No location requirements in all but 6 activities (for environmental protection ) Liberal Investment Regime

26. TAX INCENTIVES Corporate income tax holidays up to 8 years Import duty reductions or exemptions on machinery and raw materials NON-TAX INCENTIVES 100% Ownership Land rights for foreign investors Permission to bring in foreign experts and technicians Work permit & visa facilitation Basic BOI Incentives

27. BOI Basic Promotion Packages 3 Investment Promotion Zones to promote industrial decentralization Zone: 1 2 3 Incentives: Lower Higher

28. Passenger Car Project Start of Production 2010 Total investment 20,893 mil. Baht Increase total production capacity 140,000 units Estimate export volume 109,000 units Employ over 2,058 staff

29. Eco-Car Project Start of Production: 2010-2012 Project approval: 6 projects Total investment: 43.4 Billion Baht Increased production capacity: 685,000 units Estimated export volume (CBU): 344,000 units Estimated export volume (CKD): 100,000 units Estimated export value: 113,000 Mil.Baht Employment: over 9,400

30. R&D and Skill Labors In 1991, Isuzu established “Isuzu Technical Center of ASIA (ITA)” to promote localization of pickup trucks development and transferred from Japan to Thailand to enhance R&D base in ASEAN. In 2003,Toyota established a technical and testing R&D and recently established a new company “ Toyota Motor Asia Pacific Engineering and Manufacturing (TMAP-EM)” In 2005, Asian Honda Motor established a design and development center for motorcycles “ Honda R&D Southeast Asia” and Honda Motor established “ Honda R&D Asia Pacific” for automobiles. In 2008, Nissan lunched “Nissan Value-up” and established Nissan Technical Center South East Asia (NTCSEA) for expanding in the Asian Market. Thailand is a very attractive location for R&D, product development and marketing activities for emerging markets. Source: Thailand Automotive Institute

31. Incentives: Automotive Industry Cluster (Assemblers & Suppliers) Conditions Conditions  Total investment over 10 billion baht (including component parts manufacturing) (including component parts manufacturing)  Covers:  Automotive Assembling  Manufacture of Vehicle Parts and Engines  Total Investment at least THB 10 Billion Incentives Incentives  Import Duties on Machinery Exemption, regardless of zone  Corporate Income Tax Exemption by zone

32. Passenger Car Assembly Incentives Conditions – minimum investment no less than 15 billion baht – within 5 years of income tax holiday period – must have actual production not less than 100,000 units per year in any of the first five years of production Incentives – 5- year corporate income tax holiday in any zone – Projects in Zone 1, 2 or 3 receive import duty exemption on machinery

33. No corporate income tax holiday in any zone Projects in Zone 1 receive 50% reduction of import duty on machinery Projects in Zone 2 receive – 50% reduction of import duty on machinery if setting up outside industrial estate – Exemption on import duty on machinery if setting up inside industrial estate Projects in Zone 3 receive import duty exemption on machinery Incentives: General Car Assemblers

34. Incentives for Natural Gas Vehicles Current status 55,868 NGV vehicles* 166 NGV service stations* NGV on national agenda: Government Targets 99,000 NGVs by 2008 New BOI NGV incentives: NGV parts production including engines, tanks and other parts Production of natural gas equipment and machinery for NGV service stations Priority Incentives: 8 year corporate income tax holiday, duty free machinery regardless of location NGV assemblers and NGV service stations: duty free machinery regardless of zone Remark: * Dec 2007 figure from www.pttplc.com

35. No more than 5 litres/100 km Emissions complaint with Euro 4 specification or higher-carbon dioxide emissions of no more than 120 gm/km Safety standards compliant with UNECE Reg 94 and Reg 95 Conditions: Actual production of at least 100,000 units per annum in 5 year onwards Manufacture of the major engine parts identified e.g. cylinder head, cylinder block and crankshaft Minimum total investment of 5 billion baht (US$140 million) (including investment of suppliers) Incentives for All Zones: 8 year Tax Exemption Exemption of Machinery Import Duty Incentives for Eco-Car

36. Zone 3Zone 2Zone 1 Examples: Electronic Fuel Injection Systems, ABS Brake Systems, Substrates for Catalytic Converters, NGV Parts, Molds/Dies Exempt from corporate income tax for 8 years Exempt from machinery import duties Machinery Duty: 50% reduction Corporate Income tax exemption: In IE - 3 years High-Tech Machinery Duty: Exempt Corporate Income tax exemption: exempt 8 years Machinery Duty: 50% reduction Corporate Income tax exemption: In IE - 7 years Outside IE - 3 years General Investment Incentives for Automotive Component & Part Manufacturing

37. % of First Three Years’ Sales Add. Income Tax Exemption, No cap 1% or at least 150 million baht1 year 2% or at least 300 million baht2 years 3% or at least 450 million baht3 years Investment and Expenditures on: Research and development or design Advanced technology training Funding of educational and research institutes Note: Corporate income tax holiday may not exceed eight years. Additional incentives for skills, technology, and innovation (Optional)

38. Internationally- acclaimed support services: Overseas offices Country desks 1-Stop for visas & work permits: work permits in 3 hours Interaction with other govt. agencies on behalf of investors Industrial Subcontracting Vendors Meet Customers Program (BUILD Unit) Investment Matchmaker Program ASEAN Supporting Industry Database (ASID) Dedicated to creating an enabling environment for investment

39. BUILD Activities  Provide information on subcontracting opportunities in Thailand via database web applications  Assist foreign buyers wishing to source from Thai manufacturers  Match buyers and subcontractors in related businesses  Arrange participation of Thai manufacturers in trade shows and exhibitions abroad Website: http://build.boi.go.thhttp://build.boi.go.th

40. Benefits to Supply Chain  Buyers can locally source parts for domestic or global production needs  Suppliers can produce according to the needs of clients, streamlining their inventory  Demand and Supply work in-sync to enhance productive capacity

41. ASEAN Supporting Industry Database-ASID ASID features a wide range of supporting industry products classified under 5 main industry sectors to assist users in penetrating a specific market - Automotive Industry - Electronics and Electrical Industry - Petrochemical, Paper and Plastic Industry - The Mold and Die Industry - Other Industries

42. Investment Promotion Strategies: Thailand Investment Year 2008-2009

43. 1. Strengthen sectors that are already competitive: * stimulate investment in competitive sectors 2. Promote industries of the future: * promote investment in knowledge-based and high-tech industries * revise activities eligible for promotion towards higher value-added and more advanced technology 3. Promote infrastructure to accommodate future industrial expansion: * Southern Seaboard for the expansion of industries * high quality upstream steel industry to meet the rising demand 4. Promote industrial competitiveness: * offer tax incentives to change or upgrade machinery, develop technology and IT systems * promote R&D activities among local industries and upgrade industrial work force Thailand Investment Year 2008-2009

44. 5. Promote Thai Overseas Investment * establish Investment Support Centers in target countries * support knowledge development of Thai investors 6. Proactive Investment Marketing to build Thailand’s image and enhance investor confidence * through media and investment road shows * Public-Private Partnership 7. Improve investment related services and measures * propose amendment to the Investment Promotion Act * swiftly and efficiently solve problems and obstacles 8. Set up the “Competitiveness and Investment Enhancement Fund” * to support the aforementioned policies Thailand Investment Year 2008-2009

46. THAILAND OF INVESTMENT The perfect opportunity Thailand—Each Piece Fits Perfectly. www. boi.go.th