US embassy cable - 05BANGKOK5077

UNCLAS SECTION 01 OF 08 BANGKOK 005077 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR TO EAP, EAP/BCLTV 
DEPT PLEASE PASS USTR FOR BWEISEL, LCOEN, 
GENEVA FOR USTR 
COMMERCE FOR ITA/MAC/AP/OKSA/JBENDER AND JKELLY 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EINV, PGOV, PREL, KIPR, TH 
SUBJECT: The Future of Thailand's Automotive Sector 
 
 
1.(U) Sensitive but Unclassified. Please handle accordingly. 
 
2.(SBU) Summary.  By 2010, Thailand plans to produce 1.8 million 
cars and trucks annually, making it the ninth largest automobile 
production nation in the world.  While Thailand's main product 
has been the one-ton pickup truck, the Royal Thai Government 
(RTG) plans to create a second niche product, the EcoCar, to 
further establish itself as a global auto manufacturer.  In 
response to the growing competitive pressure from China, Thailand 
has signed several bilateral Free Trade Agreements, or FTAs, (and 
is looking to sign more), which benefits its automotive sector. 
In particular, if the U.S. lowers its 25 percent tariff on pickup 
trucks, it could open up a new market for producers based in 
Thailand.  American-owned manufacturers will likely steer clear 
of this potential opportunity due to agreements with American 
labor unions.  However, Japanese producers may have the capacity 
and incentive to export to the U.S. if the tariff is reduced.  At 
this point, it is uncertain whether a tariff reduction would lead 
to a flood of Thai pickups into the U.S., as Thai manufacturers 
would need to undergo significant retooling and production 
changes.  End Summary. 
 
Detroit of Asia Project 
 
3.(U) In an ambitious project to make Thailand the "Detroit of 
Asia," the RTG intends to aggressively promote expansion of 
automobile, truck, motorcycle and automotive parts production. 
The automobile industry is one of five targeted sectors (along 
with agriculture, fashion, information and communications 
technology, and skilled industry such as watch-, pen-, and optic- 
making) that the RTG plans to promote to drive growth of the Thai 
economy, with a target for these sectors to eventually contribute 
20 percent of Thailand's GDP. 
 
4.(U) According to Wallop Tiersiri, Director of Thailand's 
Automotive Institute (TAI), the Thai Auto Industry Development 
Strategy is to nearly double production to 1.8 million cars by 
the end of 2010, making Thailand the world's ninth largest 
manufacturer, up from its current position at fifteenth.  Forty 
percent of the planned production will be for exports.  The plan 
also calls for an increase in the production of motorcycles to 3 
million from the current 2.4 million, and an increase in 
production of automotive parts from the current annual value of 
120-170 billion baht (US $3-4.25 billion) to 400 billion baht (US 
$10 Billion). 
 
5.(U) The RTG has given full support to the Detroit Asia Project, 
charging the Ministry of Industry and the Office of Industrial 
Economy with guiding the project.  The RTG is also providing 
input from the private sector through the National Automotive 
Strategy Committee, which includes Ford, GM, Toyota, Honda, 
Daimler-Chrysler, and Mitsubishi. 
 
6.(SBU) In short, the major objectives of Thai auto industry are: 
-- To become the world pickup truck production base, 
-- To become the world motorcycle production base, 
-- To become the production base of auto parts of both "OEM" 
(Original Equipment Manufacturing) and "REM" (Replacement 
Equipment Manufacturing). 
 
The Project's Current Status 
 
7.(U) When the project kicked off in 2001, the midpoint target of 
1 million automobiles per year was set for 2006.  During the 
first three months of 2005, Thailand assembled 250,393 cars and 
trucks, up 14.49 per cent from a year ago.  At this rate, the 
automotive sector is expected to hit the 1-million mark ahead of 
schedule by November 2005.  Currently, forty percent of vehicles 
produced are exported, a ratio that will remain consistent even 
when the number manufactured is upped to 1.8 million. 
 
8.(U) The TAI attributes the project's success to government 
efforts to create a positive business environment, which, along 
with the competitiveness of local auto parts makers, appeals to 
foreign investors.  Corporate tax breaks, investment promotions 
from the Board of Investment, and consumer tax incentives on 
certain models have all contributed to attracting foreign 
automotive makers.  Currently, all major automotive 
manufacturers, with the exception of Volkswagen and French 
companies like Citroen and Renault, have plants in Thailand. 
This includes Honda, Toyota, Ford, General Motors, Mitsubishi, 
and Daimler-Chrysler.  Investment in Thailand's automotive 
manufacturing sector stands at over US $2 billion.  Domestic auto 
parts suppliers have been able to develop and support the 
burgeoning auto industry thanks in part to technical assistance 
from TAI, which provides IT investment, HR development, and 
regulatory improvement.  Thailand's major export markets are 
Australasia, Europe, South Asia, the Middle East, and South 
America.  A Ford executive said his company exports its vehicles 
made in Thailand to over 140 countries, the major exceptions 
being Canada, the U.S., Mexico, and China. 
 
The History of Auto Industry 
 
9.(U) The production of automobiles in Thailand has mirrored the 
general economic trends.  Production levels reached a peak of 
approximately 560,000 in 1997, but plunged to less than 160,000 
the following year as a result of the Asian financial crisis. 
The financial crisis actually helped Thailand jumpstart its 
exports; as the domestic demand faltered, Thailand was left with 
a glut of vehicles, which were then exported.  The industry has 
struggled to regain its strength since that time, and only 
surpassed 1997 production levels in 2001.  Following the crisis, 
RTG policies such as improved transparency and encouraging 
increased accountability of management to shareholders also 
encouraged the export of vehicles produced in Thailand.  That 
helped dramatically boost exports to US $2.6 billion for January- 
May 2005 from the same amount for the entirety of 2001. 
 
10.(SBU) According to an executive of Ford Thailand, the current 
diversified export base will serve as a buffer against any future 
dramatic swings in the Thai economy.  Further, he noted that 
domestic sales should stay strong as, in spite of the new subway 
and Skytrain (Bangkok's elevated mass transit system), the 
passenger car or truck is "becoming more and more indispensable 
for life Bangkok.  As the city expands, people will not want to 
take 4 buses and a subway to get to work from the suburbs." 
Also, he points out that with Thai consumers, "newness counts." 
This translates to a strong demand for new models. 
 
11.(U) Thailand is different from its regional competitors of 
India and China in that there are no domestic Thai auto 
manufacturers. However, there are numerous 100 percent Thai-owned 
auto parts manufacturers.  During the 1990s, the government 
required that certain auto components be manufactured locally. 
The RTG has since abolished these domestic content laws in favor 
of high import tariffs (from 20-33 percent) on auto parts. 
 
The Pickup Truck 
 
12. The one-ton pickup truck is Thailand's vehicle of 
choice.  Of the 418,663 vehicles produced in Thailand during 
the first five months of 2005, 67.5 percent or 282,650 were 
one-ton pickups or double cab pickups.  Approximately 66 
percent or 188,000 of these were sold domestically and the 
remainder exported.  Thailand is the second largest consumer 
and producer of pickups in the world after the U.S.  The 
Thai market distortion towards pickups is the result of the 
practicality of the pickup for a largely agrarian society, 
combined with government policy to promote this model.  In a 
biased tax scheme, Thai consumers pay just 3 percent excise 
tax for the purchase of a pickup as opposed to 30 percent or 
more for a sedan.  Pickup trucks, which run on diesel, tend 
to be less fuel efficient than sedans.  With the rising 
price of oil, Thai consumers should be more inclined to 
purchase sedans.  However, the RTG has subsidized the price 
of diesel by nearly 15 percent since January 2004, 
eliminating any incentive to purchase fuel-efficient cars. 
In July, the RTG eliminated the diesel subsidy, and the 
price of diesel has increased over ten percent in the past 
two months. As a result, domestic demand for diesel declined 
16 percent between May and July 2005.  Perhaps this new 
added expense will decrease the Thai consumer's propensity 
towards pickups. 
 
13.(U) Pickup trucks are not produced solely for Thai 
consumption.  By the end of this year, Thailand will produce 
over 400,000 CBU (Completely Built Units) for export.  One 
company, Ford-Mazda's partnership AutoAlliance Thailand, 
produces 150,000 pickup trucks each year exporting 70 
percent to 140 countries worldwide.  As Thailand's domestic 
manufacturing capacity grows beyond market demand, the 
emphasis on export will continue to grow.  In addition to 
pickups, Thailand exports several other types of vehicles. 
Of the 107,443 passenger cars produced from January-May 
2005, nearly one third or 33,175 were exported for sale 
abroad. 
Economies of Scale and Flexible Platforms 
 
14.(U) Several Thai auto executives have cited economies of 
scale and flexible platforms as the keys to continued 
success in Thai automotive production.  Most automotive 
corporations now employ flexible platforms whereby a single 
platform can be used to produce several different models or 
even various brands.  Toyota's plants in Thailand, 
Indonesia, Argentina, and South Africa use International 
Innovative Multipurpose Vehicle (IMV) platforms to churn out 
several different models of pickup trucks, minivans and SUVs 
including the Fortuna, the Avanza, and the Innova.  Having 
one platform which produces several different models allows 
automotive corporations to adjust their production based on 
consumer demand and save money by designing and 
manufacturing fewer platforms. 
 
Competition from China and the Need for a Second Niche 
Product 
 
15.(SBU) The growing economy of China and recent heavy 
investment in its automotive sector is a likely future 
competitor to Thailand's automotive sector.  In a business 
based on economies of scale, the larger Chinese economy with 
its lower labor costs is positioned to beat out Thailand as 
a regional producer.  A meeting of Thai auto parts suppliers 
cited China's advantages in the automotive sector as wage, 
demand, labor, and source of material.  On the other hand, 
Thailand's comparative advantages are information, 
infrastructure, regulation, and government policy. 
Unfortunately for Thailand, China's government could change 
its policies, beef up infrastructure, and catch up to 
Thailand in the other areas in which it lags.  China also 
has poor copyright laws.  As a result, Chinese manufacturers 
can copy the design of foreign models and compete based on 
low price.  While Thailand also has some gaps in its 
enforcement of copyright protection, the laws are in place. 
Perhaps auto IPR violations rarely occur in Thailand because 
there are no domestic Thai auto manufacturers.  However, 
there is certainly opportunity for Thai auto parts makers to 
produce copyrighted products.  According to ArvinMeritor's 
managing director, when legitimate auto parts firms learn of 
an illegitimate source copying their products, they buy out 
the illegitimate firm if their products are of good quality, 
or seek legal action if they are not.  The ArvinMeritor 
representative said that counterfeits, in general, are a 
rare occurrence. 
 
The "EcoCar" 
 
16.(U) To reach the goal of becoming an auto production hub 
in the face of growing competition from China, the Thai auto 
industry needed to develop a second product "champion" 
besides the one-ton pickup truck.  This product is the 
small, economical and environmentally friendly "EcoCar," or 
the S-car.  The RTG had two objectives in developing the 
EcoCar project: (1) Industrial Development Policy - need for 
an additional niche-manufacturing product, and (2) Social 
Policy - to produce an affordable, economical, small and 
environmentally friendly vehicle.  Heavy tax incentives 
would give the EcoCar a strong foothold in the domestic 
market, but the RTG also plans to export the EcoCar as 
Thailand's second niche product after the one-ton pickup. 
 
17.(U) According to specifications laid out by the RTG, the 
EcoCar must contain at least 70 percent locally produced 
materials.  It also must meet the "ACES" criteria: Agile 
(small), Clean (European Union 4 emission standards), 
Economical (from 280,000 to 350,000 baht and fuel efficient 
consuming 5 liters/100km or about 47 miles/gallon), and Safe 
(ECE standards).  The car's width cannot exceed 5.2 feet, 
and maximum length is 11.8 feet. 
 
18.(SBU) The RTG would like the EcoCar to be able to use 
alternative fuels, such as ethanol or natural gas, to reduce 
dependency on oil.  Specifically, the RTG plans to have the 
EcoCar use gasohol, a gasoline and ethanol blend in a nine-to-one 
ratio.  Using gasohol rather than regular gasoline reduces carbon 
monoxide emissions by 17 percent (although emissions of nitrogen 
oxide and volatile organic compounds are increased).  The RTG 
considers hybrid technology too expensive for the model to remain 
low-cost.  Some within the industry have suggested that the 
emphasis on gasohol stems from a political-business interest - an 
effort to increase income to farmers who would produce the raw 
material for producing ethanol - rather than a strategy to use 
the most environmentally friendly and economical fuel. 
 
19.(SBU) Government approval for this project could come within 
the next month giving the project an expected start date of 
January 2007.  With approval would come legal changes that give 
the EcoCar a tax incentive system similar to the pickup truck. 
However, the question on the mind of most analysts is whether the 
RTG really wants to put another 100,000-200,000 cars onto the 
notoriously crowded streets of Bangkok.  Garnering outright 
laughs from many audience members, Wallop of the TAI told an 
industry meeting that the RTG thought that the EcoCar "would 
reduce traffic jams by putting smaller cars on the road." 
 
20.(SBU) The EcoCar Project is enthusiastically supported by 
Honda, Daimler-Chrysler, GM, Suzuki, Mitsubishi, BMW, and 
Yontraki (Kia), which already have models fitting the RTG's 
standards.  Toyota still opposes the project, as it does not have 
a major model that fits the criteria.  Toyota argues that the 
body size restrictions hamper the development of future models. 
Through its strong political connections - particularly through 
its Thai partner, Siam Cement - Toyota could slow down or thwart 
approval for the EcoCar project.  In June, the RTG changed the 
maximum width requirements from 5.2 feet to 5.3 feet to convince 
Toyota to take part in the program.  This change accommodates 
Toyota's Aygo model, which was developed in partnership with 
Peugeot for European markets.  It is rumored that Toyota will not 
be happy until the EcoCar scheme accommodates its popular Soluna 
Vios and Yaris/Vitz hatchback models as well. 
 
21.(SBU) Nissan and Ford are also lobbying for more commodious 
EcoCar standards so their respective models can be included. 
Isuzu, which only manufactures trucks in Thailand, and Volvo, 
which does not have a compact model, firmly oppose the EcoCar 
scheme as they stand to gain nothing from it. 
 
Thailand's Auto Industry and FTAs 
 
22.(SBU) Many in the auto sector are asking `how will 
Thailand's spate of recent and future FTAs affect automotive 
business'?  As tariff barriers come down, many car producers 
are interested in using Thailand as a regional hub thanks to 
its low labor costs and well established manufacturing 
chain.  With regard to the Thai-U.S. FTA, American 
automotive labor unions have expressed concern over whether 
a reduction in the U.S.'s 25 percent tariff on pickup trucks 
would lead to mass imports of pickup trucks from Thailand. 
 
23.(SBU) Automotive manufacturers based in Thailand produce 
one-ton pickup trucks on platforms that are also capable of 
producing 1.5-ton pickups and SUVs.  The 1.5-ton pickup is 
the most popular selling model in the US, and is currently 
produced exclusively in North America due to high tariffs 
(from which Mexico and Canada are exempt through NAFTA). 
Several automotive parts manufacturers based in Thailand say 
they would be capable of accommodating a shift in production 
to include the 1.5-ton model.  However, producing for the 
American market would require major adjustments in order to 
meet American safety and technical standards. 
 
24.(SBU) The chief obstacle in producing for the American 
market would be the change in engines.  All engines produced 
in Thailand are 3.2 liter (or smaller) diesel engines, 
whereas the American market prefers a 4-5 liter gasoline 
engine.  In addition, a major retooling of molds and 
production lines would have to occur to accommodate the 
larger model.  Of the Thai automotive manufacturers, Toyota 
seems to be particularly well positioned to switch to 1.5- 
ton pickup production thanks to its IMV platform. 
 
25.(SBU) One possible scenario is a division in production 
of the various major components.  For instance, automotive 
companies could standardize their chassis, manufacture and 
assemble the chassis and internals in Thailand, and ship the 
partially built vehicle to North America where the engine 
would be installed. 
 
26.(SBU) In the end, automotive companies' decision to 
produce 1.5-ton pickups in Thailand for the American market 
would come down to a cost-benefit equation.  The variables 
would consist of the costs of retooling and setting up a new 
engine supply chain versus the benefit of sales in the U.S. 
with a tariff reduction.  The degree to which the tariff is 
reduced and how quickly it is reduced are major factors in 
this equation. 
 
The U.S.-Thai FTA: Little Opportunity for US Automakers and 
Auto Parts Manufacturers 
 
27.(SBU) Much of the talk surrounding auto issues in the 
U.S.-Thai FTA has focused on the export of Thai-manufactured 
vehicles to the U.S.  In reality, only the Thai side of the 
auto industry is expected to benefit from a drop in tariffs. 
American auto parts suppliers face significantly higher 
labor costs.  U.S. auto parts prices are 10-20 percent 
higher than Thai manufactured parts on simple stamp 
components (which involve little labor) even when the price 
of raw materials is comparable.  Shipping costs and the time 
component further disadvantage American suppliers.  Several 
major American manufacturers (GM, Ford, and Daimler- 
Chrysler) already have manufacturing bases in Thailand, and 
would not benefit from a reduced tariff on CBU vehicles. 
 
Lessons Learned: The Impact of Other FTAs 
 
28.(SBU) Thailand has recently signed FTAs with Australia 
and India, which include clauses on automobiles or auto 
parts.  The automotive sector of Thailand has benefited from 
both agreements just as the RTG hopes to gain from the FTAs 
it is currently negotiating with the U.S. and Japan.  The 
Australia-Thailand FTA implemented on January 1, 2005 
reduces Australian tariffs on Thai-made passenger cars from 
15 percent to 0 percent, commercial vehicles from 5 percent 
to 0 percent, and auto-parts from 15 percent to 0-5 percent. 
Trade statistics from January to April 2005 show Thailand 
taking advantage of less protection with an automotive 
exports growth rate of 54.54 percent (from US $258.9 million 
to US $400.1 million) over the same period in 2004.  The FTA 
also reduced the tariff from 80 percent to zero percent on 
passenger cars with engine size exceeding 3000 CC imported 
from Australia into Thailand.  However, demand for large 
vehicles in Thailand is low and the excise tax remains high. 
Thus, producers such as GM and Ford in the Australian 
automotive sector are discouraged from even trying to sell 
their vehicles in Thailand. 
 
29.(SBU) On August 1, 2005, Japan and Thailand reached a 
basic accord on the terms of their FTA.  Thailand agreed to 
cut tariffs on Japanese cars with engines greater than 3000 
cc by 5 percent per year (to 60 percent) until 2009, when 
the next round of talks will continue.  Initially, Japan 
also wanted a reduction of tariffs on cars with engines 
smaller than 3000 cc, but both parties have agreed to delay 
the talks until 2009. A Ford Thailand executive told us he 
pleased that Thailand protected its smaller cars as Malaysia 
acquiesced to Japan's demands for the gradual removal of 
tariffs on small cars in the Japan-Malaysia FTA. 
 
30.(SBU) Non-Japanese carmakers have objected to the drop in 
tariffs on vehicles with large engines even though the 
Australian auto manufacturers have not benefited from this 
liberalization in the Thai-Australia FTA.  Some have 
suggested that whereas Australian-manufactured autos (such 
as the Holden (GM) and Ford Australia brands) are not sold 
due to lack of brand recognition, Japanese luxury vehicles 
such as Lexus would be popular in Thailand.  As a result, 
companies such as BMW, Daimler-Chrysler, and Volvo, who have 
invested time and money in brand recognition in Thailand, 
vehemently opposed any benefits for Japanese luxury cars. 
European companies seem relieved that the tariff was not 
completely dropped, going from 80 percent to 60% tariffs 
over the next four years with further reductions to be 
negotiated after five years.  On August 2, Ford issued a 
statement saying it was pleased that the tariff was only 
partially reduced and not eliminated.  It praised the RTG 
for taking into account the concerns of non-Japanese 
carmakers. 
 
31.(U) Thailand and India reached a trade agreement on 84 
items, 13 of which were auto parts.  The agreement came into 
effect September 1, 2004; Thailand's export of motor cars, 
parts, and accessories to India rose from US $18.8 million 
for the first four months of 2004 to US $26.6 million for 
the same period in 2005. 
32.(U) However, not everyone is comfortable with the 
liberalization of Thailand's automotive sector.  As Thailand 
continues to sign bilateral agreements with global players, 
the European Union Trade Commissioner has expressed concern 
over losing out to trade diversion, particularly in the auto 
sector, to Japan.  China has chosen to avoid the matter for 
the time being.  During the Thai-China FTA negotiations, 
China decided to take automotives off the table, deeming it 
too sensitive an issue.  The FTA with China covers selected 
fruits and vegetables, but no industrial products.  However, 
an ASEAN-China FTA is in the works. 
 
The Deal with Steel 
 
33.(SBU) Japan is the top supplier of auto-grade (high 
quality) steel to Thailand.  According to executives from 
Thai Summit Eastern Seaboard Auto Parts Industry and 
ArvinMeritor, auto parts makers are facing a shortage of 
high quality steel.  They blame increased production in 
China for driving up the price of steel and exacerbating the 
shortage.  Some auto parts makers without solid connections 
to the Japanese steel industry have stated that they would 
begin looking elsewhere for high quality steel, perhaps 
Korea.  In addition, some manufacturers are looking to 
replace steel parts with those made from plastic.  Items 
typically made from steel, such as tailgates and back doors, 
can now be replaced with high quality plastic injection 
materials. 
 
34.(SBU) Several auto parts producers suggested that the 
strain of high steel costs could have been alleviated by the 
Japan-Thai FTA.  Japan's limited supply is sold at an 
average tariff rate of 8 percent.  Many were hoping that the 
Japan-Thai FTA would completely eliminate this tariff. 
However, Thai and Japanese negotiators decided to eliminate 
tariffs only for steel that is unavailable or in short 
supply in the local market.  The tariffs on the remaining 
types of steel will stay intact for 8-10 years.  Curiously, 
most within the auto sector did not seem disappointed with 
this agreement.  The GM representative, Khanchit Chaisupho, 
said he was not surprised that the tariffs would not be 
reduced for at least 8 years, but he viewed the possibility 
of reduction as a positive sign.  James Phillips from 
ArvinMeritor did not seem very enthusiastic about the 
possibility of tariff reduction, stating that the price cut 
would go directly to the consumer, bringing down the overall 
price of vehicles produced in Thailand and making them more 
globally competitive.  If global competition is indeed the 
goal, it is surprising that automakers do not feel more 
strongly about steel tariffs.  The overall attitude of 
companies is hopeful, but accompanied by low expectations. 
 
The Internal Challenges of the Industry 
 
35.(SBU) Currently, Thai auto parts suppliers are non-competitive 
against their Korean, Indian, and Chinese counterparts due to 
high overhead costs.  James Phillips of ArvinMeritor explained 
that Thai suppliers are able to survive thanks to the RTG's 20-33 
percent tariff rate on imported auto parts.  If the Thai FTAs 
with China and India were expanded to allow auto parts and auto 
parts inputs to be imported to Thailand, Thai suppliers would 
face a sink-or-swim situation where cutting overheads would be 
essential.  Phillips believes that most Thai suppliers are 
inefficient, unfamiliar with their costs, and accustomed to high 
profit margins.  Most are small, family-run operations with goals 
of creating a nest egg for their family rather than building a 
large corporation.  Should they face competition from abroad, 
lower profit margins and daily evaluation of costs would become 
the norm for the companies that survive. 
 
36.(SBU) In addition, Thailand needs to focus more on developing 
human resources in order to fully utilize high technology 
transfer.  Auto suppliers are experiencing a dearth of Thai 
engineers forcing them to hire from abroad from places like India 
and China.  If Thai auto parts suppliers want to survive 
liberalization, they need to slim down the overhead costs and 
improve engineering skills.  The Japanese and Thai governments 
have recently taken action on this problem by funding a 10-year 
training program.  Following the conclusion of the Japan-Thai FTA 
on August 1, Japanese automakers based in Thailand announced 
plans for a 10-year training program to educate 10,000 Thai 
technical and managerial personnel.  Both the Thai and Japanese 
governments will fund the training, which will cover production 
technology, die assembly, and engineering.  Toyota, Honda, 
Nissan, and Mitsubishi will send between 10-20 specialists to 
Thailand each year to conduct the training.  This further 
investment in Thailand by the Japanese could be a reaction to 
recent surges in anti-Japanese sentiment in China, which have 
concerned Japanese investors in many sectors (including auto). 
 
37.(SBU) Comment.  The future years will bring several obstacles 
for Thailand's automotive sector, most notably competition from 
China.  However, if Thailand can maintain its standing in the 
automotive market through cutting overhead costs, developing a 
second niche market, and continued supportive government 
policies, it may be able to reach its goal as the regional hub 
producer of cars and trucks. 
 
38. Comment continued.  The degree to which the Thai-U.S. FTA 
affects American automotive producers and workers FTA depends on 
the amount of the reduction of the pickup truck tariff. Thai 
automotive manufacturers have the capacity to produce 1.5-ton 
pickup trucks, but not without undergoing significant changes in 
retooling and the production process.  Automotive producers and 
auto parts suppliers give the impression that if Thai 
manufacturers do enter the U.S. market, it will be a gradual 
process. ArvinMeritor reported that they had discussed their 
clients' (AutoAlliance Thailand, GM, and BMW) future plans 
through the year 2015 with no mention of retooling for export to 
the U.S.  Whether or not Japanese producers are willing to 
undergo these changes is part of the larger cost benefit equation 
of which the tariff reduction is a key component.  End Comment. 
 
An Industry Profile: The Major Players 
 
39. Toyota 
-240,000 CBUs produced annually, holds the largest share of 
Thailand's domestic market 
-Manufacturing in Thailand since 1964 
-Registered capital of US $188 million 
-Employs over 5,000 
 
Honda 
-120,000 CBUs produced annually (40,000 exported to 30 countries, 
including Japan) 
-Manufacturing in Thailand since 1983 
 
Isuzu 
-150,000+ CBUs produced annually 
-Manufacturing in Thailand since 1966 
-Paid-up capital of US $212.5 million 
-Employs 3,200 
 
AutoAlliance Thailand (Ford-Mazda) 
-150,000 CBUs annually (70 percent exported to 140 countries) 
-Manufacturing in Thailand since 1995 
-US $500 million invested 
-Employs 2,000 
 
Mitsubishi 
-100,000+ CBUs annually, Thailand's largest exporter to 139 
countries 
-Manufacturing in Thailand since 1961 
-Registered capital of US $403.6 million 
-Employs 4,000 
-Thailand is Mitsubishi's production base for pickup trucks 
 
Nissan 
-100,000 CBUs produced annually 
-Manufacturing in Thailand since 1960 
-Employs 2,000 
 
GM 
-100,000 CBUs produced annually 
-Manufacturing in Thailand since 1996 
 
BMW 
-Installed capacity of 6,000 
-Established 2000 
-Investment US $40 million 
-Employs 290 
 
Daimler-Chrysler Thailand 
-Formed in 1998 with merger 
-Registered capital of US $15 million 
-Employs 270