ThailandThailand AutomotiveAutomotive IndustryIndustry andand InvestmentInvestment OpportunitiesOpportunities

Ms. Sudjit Inthaiwong Deputy Secretary General Board of Investment 16 March 2007 Thailand PresentationPresentation OverviewOverview

• Economy and Business Climate Overview • Infrastructure • Investment Opportunities • BOI Incentives and Outsourcing services OverviewOverview ofof ThailandThailand’’ss EconomyEconomy andand BusinessBusiness ClimateClimate ConsistentConsistent growthgrowth andand productivityproductivity

‰ Gross Domestic Product 5% in 2006* ‰Foreign Direct Investment US$ 8.12 billion 2006 ‰US $41.34 billion State Budget 2007** ‰Current Account at 6-year high US$ 3.2 billion ‰Unemployment at 1.3% and underemployment at 1.7% ‰Capacity utilization a steady 73.5% *Revised by NESDB **1.566 trillion baht $37.88/THB WorldWorld BankBank’’ss EaseEase ofof DoingDoing BusinessBusiness ASEAN/China GLOBALGLOBAL dd Singapore iillaann 1 TThhaa RANKINGSRANKINGS Thailand 18 Malaysia 25 China 93 Vietnam 104 Philippines 126 Indonesia 135 Cambodia 143 Laos 159 0 20 40 60 80 100 120 140 160 180 Source: World Bank Study: Doing Business in 2007 ThailandThailand RatedRated #3#3 MostMost AttractiveAttractive FDIFDI LocationLocation inin AsiaAsia byby UNCTADUNCTAD (2005(2005-- 2008) 2008) • UNCTAD survey of Ranking of FDI world’s 325 largest Prospects in Asia transnational corporations Top 1 China • Asian region has most Top 2 India positive FDI prospects • Overall, Thailand TopTop 33 THAILANDTHAILAND Top 4 Vietnam ranked #9 in world Top 5 South Korea

UNCTAD Global Investments Prospects Assessment, Sept. 2005 JBICJBIC FYFY 20062006 SurveySurvey ‰When asked about profitability for each region, including Japan, “the percentage of companies answering “higher” was greatest for Thailand” ‰In E&E, within the ASEAN4, the response to “strengthen or expand” is largest in Thailand. ‰In automotives, “strengthen or expand” stronger in Thailand than any other region, including Southern China and North America. QualityQuality atat LowLow CostCost ‰Ranked 127 in global “Cost of Living Survey* ‰A lowest cost destination within the region and the world ‰Avg. general industry wage US$146/mth** ‰Avg. Monthly office rent US$11.67/sqm** “Thailand’s assets include an entrepreneurial population, abundant natural resources and a wonderful lifestyle and, if these strengths are promoted and supported, the country will continue to be a great place to do business” Grant Thornton International Business Owners Survey 2006

*Mercer Human Resources Consulting **Jetro Survey March 2006 Low level of bureaucracy

Singapore dd 6 iillaann Malaysia 30 TThhaa Thailand 33 Number of days to incorporate China 35 and register new firms India 35 Philippines 48 Vietnam 50 97 Indonesia Source: World Bank Group www.doingbusiness.org Infrastructure EnhancedEnhanced InfrastructureInfrastructure ‰‰ TransportationTransportation ‰ National highway system: 64,000 km connecting all 76 provinces 9 Expanding connections into Cambodia, Laos, Vietnam and southern China ‰ 7 international airports ‰ Rail systemsystem:: 4,000 km linking to Malaysia & Singapore ‰ Citywide light rail 9 US $4.8 billion expansion ‰ Communications ‰ Mobile phones: growing 8 million in 2006 to 39 million users, with a 60%+ market penetration rate ‰ Wi-Fi and broadband access ‰ Shipping ‰ 8 deep sea ports 9 Including tanks farms and liquid jetties 304 Industrial Park

Amata Industrial Estate

Asia Industrial Estate

Gateway City Industrial Estate

Hemaraj Land and Development PLC

Laem Chabang Industrial Estate

Map Ta Phut Industrial Estate Padaeng Industrial Estate

Ping Thong Industrial Estate

Rojana Industrial Park

Wellgrow Industrial Estate

International School & University

Golf Course

Hospital PercentagePercentage ofof ForeignForeign InvestorsInvestors inin IndustrialIndustrial EstatesEstates Japan USA England Germany Korea Singapore Australia Taiwan Belgium Netherlands India Malaysia China Hong Kong ThaiThai GraduatesGraduates byby MajorMajor Major 2004 2005 Humanities and Social 229,561 232,704 Sciences Science, Technology, and 77,329 82,415 Engineering Health Science 12,942 17,105 Technology and Business 9,085 15,037 Computer (vocational) TOTAL 319,832 332,224

Source: Commission on Higher Education; includes BA, MA, and post-graduate degrees ThaiThai GraduatesGraduates inin Science,Science, 140,000 Technology,Technology, andand EngineeringEngineering 120,000 100,000 80,000 60,000 40,000 20,000 0 2004 2005 2006 2007 2008 2009 2010

Source: Commission on Higher Education; includes BA, MA, and post-graduate degrees Investment Opportunities ““SustainableSustainable ProductionProduction BaseBase”” Thailand : The Automotive Hub of Asia

Production Center

Exporting Center IndustrialIndustrial StructureStructure

Thailand Car sales

Passenger PPV & SUV Car 7% 27%

Other Commercial Car Pickup 6% Truck 1 ton 60%

First-tier 648 Companies 1,641 Second-tier Companies

Third-tier InvestmentInvestment OpportunitiesOpportunities inin AutomotiveAutomotive IndustriesIndustries • Auto assembly for local and export markets under AFTA and other FTA arrangements • Auto part manufacturing to serve domestic and export markets • Motorcycle production for local and export markets • NGV 2011 target: 257,000 cars, 533 stations 20102010 TargetTarget –– WorldWorld’’ss TopTop 1010 • Total production of 2 million units • Domestic sales of 1 million units 1-ton trucks – 700,000 units Passenger cars – 250,000 units Commercial Veh. – 50,000 units • Exports of 1 million units 1-ton trucks – 800,000 units Passanger cars – 200,000 units ““ProductionProduction BaseBase”” Production Base Sedan of One-Ton Pick Assembly Up Factory • Investment value within the country High Low (the whole Cluster) • Production Value within the country High Low (GDP share) • Value added share within country 70 – 80 % 10 - 50%

• Export opportunity of cars and World Market Quota auto-part OEM • Thailand product image in foreign market Yes No

• Producer opportunity for auto-part REM Good Hard to be true and Thai Accessories Opportunity

• Persistence in free trade market Persistence Uncertain Thailand:Thailand: AutomotiveAutomotive HubHub ofof ASEANASEAN

• 2006 production ~ 1,176,840 million units • 15 assembly plants • Export ~ 539,206 units • Largest in Southeast Asia • Capacity of 2.0 million units by 2010 • Production of pickup trucks ~ 877,890 units – world’s largest one-ton pick-up truck manufacturer VehicleVehicle ProductionProduction 20062006 Passenger Cars 298,678

Trucks 878,162

Motorcycles 2,079,555

Source: Thailand Automotive Institute AutomotiveAutomotive IndustryIndustry inin ThailandThailand 1,400,000 Thousand Units 1,200,000 Production Domestic Export 1,176,840 1,000,000 Avg.Avg. GrowthGrowth 35%35% PerPer YearYear (1998(1998 –– 2006)2006) 1,177 800,000 928 683 750 682,693 600,000 571 589 584 626 485 459 539,206 525 559 400,000 389 411 533 434 327 409 539 363 296 332 158 200,000 262 233 218 152 175 180 144 130 42 66 0 21 8 14 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 VehicleVehicle ProductionProduction inin ThailandThailand MotorcyclesMotorcycles ExcludedExcluded 1,400,000

1,200,000

1,000,000 Passenger Cars & 800,000 Off-road Passenger Vehicles 600,000 Pickup and Pickup Passenger Vehicles 400,000 Total (non- 200,000 motorcycles) 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source:Thai Automotive Institute 12 AutomotiveAutomotive ProductionProduction 10 TopTop 1515 ManufacturersManufacturers (2005(2005 data)data) 8 6 4 2 0 l y a a e a o a a i y S n n i K i i a a n n e c i d z c s l U a i r n a a i d h a . p o a U x s t h a p n r . n u T I 1 a m r e I . . J r C K S a B 0 . . . . F . . R 4 5 e . 1 M 2 . 2 4 S 7 C 9 1 1 . 6 . . 1 3 G 1 . 5 8 1 3 1 SpareSpare AutoAuto PartsParts ExportsExports

150 $132.69132.69 100 108.26 76.81 57.60 50 46.42 47.42 32.88 23.32 13.34 19.08 0 5.69 1996 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06

Unit: Million US$ VehicleVehicle JigJig && DieDie ExportsExports

30 US$18.2318.23 21.05 20 18.04 10 3.73 3.17 3.73 3.83 4.53 0 1.15 1.49 1.68

1996Unit: Million '97 US$ '98 '99 2000 '01 '02 '03 '04 '05 '06 OEMOEM AutoAuto ComponentComponent PartPart ExportsExports

3000 US$2,124.85 2000 1000

0

1996 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 Unit: Million US$ ThailandThailand MotorcycleMotorcycle ProductionProduction 3,500

3,000 Production 2,867 Domestic Sales 2,500 2,378 2,359 Exports ) 2,112 2,080 2,000 1,962 2,027 2,055 1,767 1,500 1,551 1,575 1,414 1,179

Units (1,000 Units 1,328 1,465 1,047 1,050 1,338 1,236 818 1,000 771 907 911 831 784 500 527 604 585 604 86 178 137 245 214 267 272 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: Thai Automotive Institute MarketMarket StructureStructure

One-Ton Pick Sedan Up

•World Market size 1.2 Million cars 34.1 Million Cars

• Leader production country Thailand USA

• Production volume of the 0.8 Million cars 7.4 Million cars leader country • Thailand Market size 0.4 Million Cars 0.2 Million Cars

• Analyze as Boston Model Thailand is S t a r Thailand is D o g

• Product Positioning in “Global Mass” the world market "Global Niche" 600,000 800,000

700,000AutomotiveAutomotive SalesSales andand ExportsExports500,000

600,000 Sales 400,000 Exports 500,000 s

300,000 ) 400,000

300,000 200,000

200,000 (Units Exports

Domestic Sales (Unit Sales Domestic 100,000 100,000 0 0 91 92 93 99 00 01 02 03 04 05 19 19 19 1994 1995 1996 1997 1998 19 20 20 20 20 20 20 2006 2 5k m KeyKey InfrastructureInfrastructure Suvarnabhumi Airport ManyMany autoauto firmsfirms Eastern Seaboard are located on Industrial Area are located on ThailandThailand’’ss EasternEastern SeaboardSeaboard

Laem Chabang 5757 IndustrialIndustrial EstatesEstates Port DeepDeep seaports:seaports: 5 million TEU capacity 1. AUTOMOTIVE CLUSTER

Automotive Manufacturer Location Pathumthani Ayudhaya Thai Suzuki Motor Honda Automobile Chachoengsao (Thailand) Toyota Motor Thailand Isuzu Motors (Thailand) Bangkok Samutprakarn Bangchan General Assembly Toyota Motor Thailand Y.M.C. Assembly Isuzu Motors (Thailand) Thai Honda Manufacturing Siam Nissan Automobile Siam V.M.C. Automobile Thai Auto Work Rayong Millennium Motors Auto Alliance (Thailand) Thai Yamaha Motor General Motors (Thailand) Thai Swedish Assembly BMW Manufacturing (Thailand) Hino Motors (Thailand) Kawasaki Motors Enterprise Samutsakorn Thonburi Automotive (Thailand) Thai Rung Union Car Assembly MMC Sittipol PrincipalPrincipal AutoAuto PartsParts ProductionProduction SitesSites inin ThailandThailand

Pathumthani Total suppliers: 39 Body Parts: 18%, Engine Parts; Electrical Parts: 13% each, Suspension & Brake Parts: Rayong 10%, Drive, Transmission &Steering Parts; Total suppliers: 41 Accessories: 8% each, Other: 31% Body Parts: 24%, Engine Parts; Drive, Transmission &Steering Parts: 15% each, Bangkok Suspension & Brake Parts: 12%, Electrical Parts: 10%, Accessories: 7%, Total suppliers: 232 Mold&Die: 2%, Other: 15% Body Parts: 9%, Engine Parts; Electrical Parts; Drive, Transmission &Steering Parts; Accessories: 6% each, Suspension & Brake Parts: 4%, Mold&Die: 3%, Other: 60%

Chonburi Samutprakarn Total suppliers: 55 Total suppliers: 158 Body Parts: 25%, Engine Parts: 22%, Body Parts: 22%, Electrical Parts: 15%, Drive, Transmission &Steering Parts: Engine Parts; Drive, Transmission 15%, Electrical Parts: 9%, Accessories: &Steering Parts: 8% each, Suspension & 5%, Suspension & Brake Parts: 4%, Brake Parts: 5%, Mold&Die: 4%, Mold&Die: 4%, Other: 16% Accessories: 3%, Other: 36% MoreMore MouldsMoulds && DiesDies NeededNeeded inin ThailandThailand

Thailand is still in need of moulds & dies to produce the following products:

• Moulds for Die Casting - Engine block -Crank shaft - Front case - Oil pan - Gear box – auto - Safety parts : Master pump & Clipper brake

• Moulds for Plastic Injection - Automotive Electronic Control Unit (ECU) - Housing for automotive steering column - Automotive dashboard - Parts for digital camera & cellular telephone - Parts for notebook computer and PDA (personal digital assistant)

• Transfer press dies - Automotive body press die PriorityPriority GovernmentGovernment PoliciesPolicies PromotePromote NGVsNGVs andand EcoEco--carcar InvestmentInvestment OpportunitiesOpportunities inin AutomotiveAutomotive IndustriesIndustries ‰ Auto assembly for local and export markets under AFTA and other FTA arrangements ‰ Auto part manufacturing to serve domestic and export markets ‰ Motorcycle production for local and export markets ‰ NGV segment target: 120,000 NGVs by 2008 OpportunitiesOpportunities inin ComponentComponent ProductionProduction ‰ 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 NGVNGV ReducesReduces EnergyEnergy’’ss CostCost ofof ThailandThailand

1. For Nation

NGV station investment cost 43,600 million baht NGV vehicle investment cost 45,700 million baht Reduced oil consumption ~10 million liter/day Increased NGV consumption ~365 million ft3/day

Unit: Million Baht Dubai Crude Price Level ($/BBL) 50 IRR 32% NPV@12% 113,600 Reduced import value per year 62,200 Reduced energy’s cost per year 39,500

Remarks: Project life is 20 year (Investment is during 2006 – 2010). There are 500,000 vehicles with 740 NGV stations. Oil and gas price @ Dubai is $50/BBL. NGVNGV StationsStations TechnologyTechnology forfor NGVNGV VehicleVehicle DIESEL 1. Dedicated NGV - It uses NGV only. - Most vehicles are produced from manufacturers (OEM) and fitted the additional equipments or adapted the engines (Retrofit, Repowering). - It saves completely because of using NGV only. - The expense is high. 2. Duel Fuel - It uses both NGV and diesel or diesel only. - The vehicles are produced from manufacturers (OEM), fitted additional equipments, or adapted the engines (Retrofit, Repowering). - It has low expense and installs fast. - The duel fuel saves less than dedicated NGV. NGVNGV ExpansionExpansion TargetTarget Vehicles Type 2006 2007 2008 2009 2010 2011 Benzene 22,890 52,000 74,700 101,000 128,000 160,000 Car Diesel Car 2,950 8,850 24,300 50,300 79,600 96,600 Total NGV 25,840 60,850 99,000 151,300 207,600 256,600

Stations Region 2006 2007 2008 2009 2010 2011 BKK/vicinity 73 181 212 253 277 285 Countryside 31 89 138 172 203 250 Total stations 104 270 350 425 480 535 TechnologyTechnology forfor NGVNGV VehicleVehicle BENZENE 1. Car with the installation of NGV equipments (Bi Fuel) - Bi Fuel: It can select to use benzene or NGV. - Installation cost is ~30,000-60,000 baht. The capable distance is 150-200 kilometers.

2. There are two types of manufactured car (OEM) : Dedicated and Bi Fuel. - Dedicated: It uses NGV only. - Bi Fuel: It can select to use benzene or NGV. -The car price will be added ~ 150,000-200,000 baht. The capable distance is 300-500 kilometers. EcoEco--CarCar InvestmentInvestment PromotionPromotion

¾Fuel consumption no more than 5 litres/100 km ¾Emissions standards compliant with Euro4 specification or higher  Carbon dioxide emissions no more than 120 gm/km ¾Safety standards for front and side impact to comply with UNECE Reg. 94 and Reg.95 specifications, or higher GeneralGeneral GuidelinesGuidelines forfor EcoEco--carcar IncentivesIncentives

‰ Project package must be proposed along with:  auto assembly, motor manufacture and motor vehicle parts project, and  investment and manufacture plan for 5-yr period must be included, along with actual production quantity of not less than 100k units/yr from the fifth year ‰Qualify on MOI energy saving, environmental and safety specifications Why?Why? <=<= 55 L/100L/100 kmkm

5L/100km5L/100km == COCO2 120g/km120g/km forfor BenzeneBenzene engineengine

 In 1998, EU agreement with automotive companies that by 2008, 2012 cars sold in EU will have an average of CO2<=140g/km and 120g/km

 “The European Commission has published an action plan on energy efficiency which restates the threat to the car industry that legislation will come if the makers do not meet the EU’s carbon dioxide reduction target of 120 g/km by 2012.” [European Federation for Transport and Environment, October 2006] BOIBOI IncentivesIncentives andand outsourcingoutsourcing servicesservices TheTheThe BoardBoardBoard ofofof InvestmentInvestmentInvestment BasicBasicBasic IncentivesIncentivesIncentives andandand MeasuresMeasuresMeasures ‰ Land ownership: A promoted company 50% or more foreign owned may apply, per section 27 Investment Promotion Act ‰ Permission to bring in technicians and experts ‰ Corporate Tax exemption: 3 to 8 years ‰ Import duty exemption/reduction on machinery and raw materials ‰ Subsequent 50% reduction of corporate income tax after expiration of exemption ‰‰ DoubleDouble deductiondeduction of public utility costs ‰ Deductions for infrastructure construction/installation costs AutomotiveAutomotive IndustryIndustry ClusterCluster:: AssemblersAssemblers && SuppliersSuppliers ApplyingApplying asas PackagePackage forfor BOIBOI PromotionPromotion • Conditions Total investment at least THB 10 billion ($250 million) including component parts manufacturing Covers: ¾Automotive Assembling ¾Manufacture of Vehicle Parts and Engines

• Incentives All Zones: Duty Free Machinery LocalLocal SourcingSourcing BUILDBUILD ‰ Promote and develop supporting industries ‰ Strengthen parts and component market ‰ Increase capability of Thai suppliers ‰ Assist suppliers to tailor parts and components production to the needs of manufacturers ‰ Stimulate localization – induce manufacturers to source domestically ‰ Attract foreign investment BUILDBUILD ProgramsPrograms ‰ Vendors meets customers 9Suppliers taken directly to assembly plants ‰ VMC Road Show 9Hannover Fair, MIDEST, MTech ‰ BUILD Marketplace 9Suppliers exhibit at domestic trade shows ‰ BUILD Sourcing Program 9Local sourcing for domestic and global supply chain SubconSubcon 20072007 300 component manufacturers to participate in Subcon Thailand 2007, held alongside Intermach ’07, South East Asia’s Premiere Machinery Exhibition ShowShow ProfileProfile • Date and Time 9-13 May 2007 / 10.00 AM – 07.00 PM (The exhibition is held during the same period as Intermach 2007) • Venue BITEC International Conference and Exhibition Center, Bangkok, Hall 105 • Exhibition Area 6,000 square meters 54 WWW.BOI.GO.TH