Chapter 3

Development of the Thai Automobile and Auto Parts Industries

3.1 Historical Development of the Thai Automobile Industry

The Thai automobile industry was promoted in line with import substitution policy.
It was among the first industries to receive an investment promotion from the Board of
Investment (BOI) and was targeted to promote other industries through its potential linkage
creation. In 1961, Anglo Thai Motor (the English Ford distributor) was established and
began assembling completely knocked-down kits (CKDs). The same year, Mercedes Benz
and Fiat cars were assembled by Thonburi Phanich and Kanasutra, followed by Nissan
(1962), Toyota (1964), Prince (1965) and Mitsubishi, Isuzu and Hino (1966). From that
time to the present, 24 assembly plants have been built (see Table 3.1). But, according to a
report by the Ministry of Industry (MOI 2001), there were 17 automobile assemblers in
2001, with an annual production capacity of 996,800 units annual production capacity (see
Table 3.2). Since the ban on new assembly plants was lifted in 1993, four new projects,
namely, Honda, General Motors, Auto Alliance Thailand (AAT), and BMW, have been
established. The appearance these new firms has not only led to higher competition in the
domestic market but also paved a way for Thailand to become an export base. Incumbents
such as Toyota, Mitsubishi, and Honda have also adopted export strategies, and have
already implemented plans to use Thailand as their export base. After only 40 years of
development, the Thai automobile industry is now becoming more externally oriented.

31

Table 3.1 The Establishment of Automobile Assemblers

Year
1961

Assembler Company

Share Holder

1. Anglo Thai Motor

NA

2. Thonburi panich

Thai 100 %

3. Kanasutra General Assembly

NA

4.Siam Motor & Nissan

Nissan 25% Thai 75%

1964

5. Toyota Motor Thailand

Toyota 70% Thai 30.4%

1965

6. Prince Motor Thailand

NA

1966

7. Sahapattana Motor

NA

8. MMC Sittipol

MMC 46.23%, Thai 52.77%*

9. Isuzu Motor Thailand

Isuzu 49%, Thai51%

10. Thai Hino Industry

Thai-Hino 30%, Hino 35%, Mitsui 35%

11. Amulkamared Engineering

NA

12. Thai Pradith Motor Assembly

NA

13. Nai Lert

NA

1972

14. Bangchan General Assembly

Honda 34%, Thai 66%

1973

15. Thai Rung Union Cars

Australia & Singapore 15% Thai 85%

1975

16. Y.M.C Assembly

Thai 100%

17. Sukosol &Mazda Motor Industry

Mazda 64.4%, Thai 35..6%

1976

18. Thai Swedish Assembly

Sweden 56% Thai 44%

1977

19. Siam Motor Industry

Thai 75 % Japan 25%

1995

20. Auto Alliance (Thailand)

Ford 48% Mazda 45% Thai 7%

1996

21. Honda Car Manuf. Assembly

Thai 51 Japan 49%

22. Siam V.M.C.

NA

23. General Motor

GM 100 %

24. BMW

NA

1962

1968

1997

Note: *Mitsubishi Motors Corporation plan to increase share holder to 90%

(from www.auto-asia.com , August 7, 2001)
Source: The Office of Industrial Economics, Ministry of Industry
Department of Industrial Works, Automotive Industry Directory 2000, p. 111

32

Table 3.2 List of Automobile Assemblers and Production Capacity in 2001

(number of vehicles)
No.

Assemblers

Passenger

Pickups

cars
1

Toyota Motor Thailand

MMC. Sittiphol

Trucks and

Total

Buses

100,000

100,000

200,000

42,000

118,000

14,400

174,400

Isuzu Motor Thailand

110,000

20,000

130,000

Siam Nissan Automobile

78,000

3,900

81,900

Honda Cars Manufacturing Thailand

50,000

50,000

Siam Motors and Nissan

31,200

31,200

Bangchan General Assembly

20,000

20,000

Thonburi Assembly

13,500

1,400

14,900

Y.M.C. Assembly

12,000

12,000

10

Thai Rung Union Car

9,600

11

Hino Motor Thailand

9,600

9,600

12

Thai Swedish Assembly

6,000

6,000

13

Siam VMC Automobile

6,000

6,000

14

Motor & Leasing (Thailand)

200

200

15

Auto Alliance Thailand

201,000

201,000

16

General Motor Thailand

40,000

40,000

17

BMW Manufacturing (Thailand)

10,000

10,000

9,600

Total
334,300
613,000
49,500
996,800
Note: General Motor Thailand and BMW Manufacturing (Thailand) have operated assembly lines
since 2000.
Source: Automotive Industry Directory 2000, Office of Industrial Economics, Ministry of Industry

33

3.1.1 Pattern of domestic production and sales

As will be discussed in the following section, the development of the Thai
automobile industry can be classified into three major periods: early promotion and
industry protection through import substitution policy (1960 1970), rationalization
through Local Content Requirement (LCR) policy (1971 1986), and export expansion
(1987 present). Within 25 years, the automobile industry has gradually transformed itself
from an import substitution to an export industry. 1 Since the investment promotion
privilege was offered, many assembly plants were established and began production,
resulting in gradual growth of the domestic product. As shown in Table 3.3, Figure 3.1,
and Figure 3.2, domestic production has gradually grown from only 525 units in 1961 to
15,014 units in 1971, 87,159 units in 1981, and almost 600,000 units in 1996.
Until 1987, almost all production was for the domestic market only. In 1961,
domestic production of only 525 units represented about 8 percent of domestic demand
(6,860 units); see Table 3.3, Figure 3.1, Figure 3.2 and Figure 3.3. While the domestic
demand grew sharply from 1960 to 1970, from 6,860 units to 49,266 units, production
began to expand and was able to meet local demand during 1970s, after 19 assemblers set
up facilities and began production. This pattern is shown by Figure 3.3, in which the ratio
of production to sales rose steadily, reaching almost 80 percent by the end of 1970s.
Production and sales experienced a sharp increase in 1983 1984, when both were
higher than 100,000 units. The Thai automobile industry had expanded rapidly since 1987.
Compared to the 101,624 units of domestic demand in 1987, the industry achieved takeoff
when demand doubled in 1989, trebled in 1990, quadrupled in 1993, and nearly sextupled
in 1996. Both domestic production and sales reached their peaks in 1996, with total

Since 1987, export of vehicles from Thailand became noticeable and has grown significantly since the late
1990s.

34

amounts of nearly 600,000 units. The rapid growth during the 1990s makes that period the
golden age of the Thai automobile industry. However, the industry floundered during the
economic crisis of 1997 and continued to tumble in 1998 before its subsequent recovery.
Analysts estimated that market capacity in 2001 would be about 300,000 units (Bangkok
Post Mid-year Economic Review 2001). Although it is evident that the Thai automotive
industry has become more competitive on the global market, the underlying factors that
promote such development require discussion.
As already mentioned, the structure of domestic production and sales of both
passenger cars and commercial cars have changed fundamentally over four decades. As
Figure 3.4 shows, domestic production in 1970 was concentrated on the assembly of
passenger cars, which accounted for 62 percent of total production. Commercial vehicles
now have a higher place in production. The ratio of commercial to passenger vehicles has
increased steadily, from 38 percent in 1970 to 68 percent in 1980, reaching 75 percent in
2000. Although the overall production structure showed no significant change during 1990
and 2000, structural changes were evident in each sector. In the passenger cars sector, the
current trend is toward vehicles with engine sizes of 1,501 to 1,800 cc, and more than
2,000 cc. Among commercial vehicles, one-ton pickups now dominate the Thai automobile
industry, at 95.5 percent in this sector; put in another way, 300,000 vehicles produced in
2000 were one-ton pickups (see Figure 3.5).2

One-ton pickup trucks were foreseen as Thailands national car by the BOI as early as 1990s (BOI 1993,
p. 23). Production of commercial cars is more suitable to Thailand because of higher domestic demand,
greater labor intensively, less frequent design changes and lower tooling costs than that of passenger cars
(Noppadol 1995, p. 40).

35

Table 3.3 Automobiles Production and Sales (1961 2001 November)

(number of vehicles)
Year
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001(JanNov)

Passenger
car
310
908
1,817
3,978
4,408
4,898
6,211
7,209
6,110
6,604
9,017
11,630
17,935
17,572
15,524
15,333
18,564
21,869
21,602
23,441
26,650
24,629
33,945
36,127
24,861
21,046
29,333
54,459
58,761
73,766
76,938
104,565
144,449
109,830
127,640
138,579
112,041
32,008
78,538
103,089
143,989

Production
Sale
Commercial
Total
% growth Passenger Commercial
car
car
car
215
525
n.a.
3,542
3,318
276
1,184
125.52
4,658
3,680
1,628
3,445
190.96
9,096
6,303
3,289
7,267
110.94
11,178
9,891
5,687
10,095
38.92
10,974
13,724
5,749
10,647
5.47
14,984
15,835
6,607
12,818
20.39
23,316
26,115
6,779
13,988
9.13
27,898
36,188
6,030
12,140
(13.21)
24,376
41,069
4,063
10,667
(12.13)
21,828
27,438
5,997
15,014
40.75
18,008
26,595
7,755
19,385
29.11
18,027
26,156
9,499
27,434
41.52
30,175
39,843
14,891
32,463
18.33
29,211
44,644
15,467
30,991
(4.53)
23,388
54,729
25,729
41,062
32.50
20,699
57,642
47,310
65,874
60.43
25,480
75,843
45,200
67,069
1.81
23,233
66,034
45,137
66,739
(0.49)
22,043
66,816
50,544
73,985
10.86
26,840
62,361
60,509
87,159
17.81
27,672
62,372
52,655
77,284
(11.33)
27,356
63,830
75,314
109,259
41.37
32,779
85,732
74,910
111,037
1.63
31,500
82,049
58,244
83,105
(25.16)
22,097
63,125
53,116
74,162
(10.76)
22,481
55,973
68,815
98,148
32.34
27,116
74,508
99,724
154,183
57.09
38,768
107,712
154,787
213,548
38.50
47,705
160,538
231,077
304,843
42.75
65,864
238,198
206,177
283,115
(7.13)
66,779
201,781
223,393
327,958
15.84
121,441
241,546
275,582
420,031
28.07
174,169
282,299
325,231
435,061
3.58
155,670
330,008
398,040
525,680
20.83
163,371
408,209
420,849
559,428
6.42
172,730
416,396
248,262
360,303
(35.59) 132,060
231,096
126,122
158,130
(56.11)
46,300
97,765
248,695
327,233
106.94
66,858
151,472
308,632
411,721
25.82
83,106
179,083
276,243

420,232

n.a.

90,542

169,671

Total

% growth

6,860
8,338
15,399
21,069
24,698
30,819
49,431
64,086
65,445
49,266
44,603
44,183
70,018
73,855
78,117
78,341
101,323
89,267
88,859
89,201
90,044
91,186
118,511
113,549
85,222
78,454
101,624
146,480
208,243
304,062
268,560
362,987
456,468
485,678
571,580
589,126
363,156
144,065
218,330
262,189

n.a.
21.55
84.68
36.82
17.22
24.78
60.39
29.65
2.12
(24.72)
(9.46)
(0.94)
58.47
5.48
5.77
0.29
29.34
(11.90)
(0.46)
0.38
0.95
1.27
29.97
(4.19)
(24.95)
(7.94)
29.53
44.14
42.16
46.01
(11.68)
35.16
25.75
6.40
17.69
3.07
(38.36)
(60.33)
51.55
20.09

260,213

n.a.

Source: Noppadol (1995, Table 3.1), Federal of Thai Industries, Thailand Automotive Institution

36

Figure 3.1 Production of Automobiles in Thailand (1961-2001)

Passenger Cars

Commercial cars

Total

600,000
500,000
400,000
300,000
200,000
100,000

2001(Jan-Nov)

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

Source: From information in Table 3.3

Figure 3.2 Sales of Automobiles in Thailand (1961-2001)

Passenger Cars

Commercial Cars

Total

600,000
500,000
400,000
300,000
200,000

Source: Same as Figure 3.1

37

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

2001(Jan-Nov)

100,000

Figure 3.3 Ratio of Domestic Production and Sales

1.8
1.6
1.4
1.2
1
0.8

38
0.6
0.4
0.2

Source: Same as Figure 3.1

2001(Jan-Nov)

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

Figure 3.4 Structure of Domestic Production (1970 2000)

Production in 1980 (73,985 units)

Production in 1970 (10,667 units)

Commercial
Cars
38%

Passenger Cars
32%

Passenger Cars
62%

39

Production in 1990 (304,843 units)

Production in 1995 (525,680 units)

Source: Same as Figure 3.1

Production in 2000 (411,721 units)

Passenger
Cars
24%

Passenger Cars
24%

Commercial
Cars
76%

Commercial
Cars
68%

Commercial
Cars
76%

Passenger
Cars
25%

Commercial
Cars
75%

Figure 3.5 Structure of Automobile Production in Thailand (1990 2000)

Structure of Passenger Cars Production (1990 - 2000)

In 1990 (73,766 units)

More than
2000cc
8%

In 1995 (127,640 units)

Less than
1,200cc
0.1%

More than
2000cc
14%

1,201-1,500
38%

1,801-2,000
31%

In 2000 (103,089 units)

Less than
1,200cc
1%

1,801-2,000
5%

1,201-1,500
41%

1,201-1,500
29.7%

1,801-2,000
6.8%

1,501-1,800
39%

1,501-1,800
23%

Less than
1,200cc
0.0%

More than
2000cc
17.5%

1,501-1,800
46.0%

40

Structure of Commercial Cars Production (1990 - 2000)

In 1990 (231,077 units)

5 - 10 tons
4.5%
< 5 tons
1.0%

10 tons up
13.9%

Bus Pickup < 1 ton

0.3%
6.8%

Pickup 1 ton
73.6%

In 1995 (398,040 units)

5 - 10 tons
4.0%
< 5 tons
0.4%

10 tons up
7.8%

Bus
0.4%

Pickup < 1 ton

4.8%

Pickup 1 ton
82.6%

In 2000 (308,632 units)

< 5 tons
1.1%

5 - 10 tons
1.3%

10 tons up
0.6%

Pickup < 1 ton

1.5%

Pickup 1 ton
95.5%

Source: Created from information reported by The Thai Automotive Industry Association and Thailand Automotive Directory 2000, page 120

Figure 3.6 Structure of Domestic Sales in Thailand (1970 2000)

Sales in 1970 (49,266 units)

Sales in 1980 (89,201 units)Passenger

Cars
30%

Passenger
Cars
44%

Commercial
Cars
70%

Commercial
Cars
56%

41

Sales in 1990 (304,062 units) Passenger

Sales in 1995 (571,580 units)

Cars
22%

Commercial
Cars
78%

Source: Same as Figure 3.1

Sales in 2000 (262,189 units)

Passenger
Cars
32%

Passenger Cars
29%

Commercial
Cars
71%

Commercial
Cars
68%

Structural changes in domestic sales from 1970 to 2000 were subject to the same
trend as production, i.e., commercial cars gained popularity over passenger vehicles.
However, the trend has been reversed since 1990; the ratio of sales of passenger cars has
been increasing, from 22 percent in 1990 to 32 percent in 2000 (see Figure 3.6). A reason
for this is the liberalization policy of the Thai Government, lifting the import ban on
completely built-up vehicles (CBU) and reducing import tariffs on automobiles in 1991.
Before the enactment of the tariff reduction, in 1990, passenger cars were taxed at 180
percent while commercial cars were taxed at 120 percent. The new tariff for both types was
set at 60 percent, meaning that reduction in price of passenger cars was relatively greater.
The removal of import ban and the considerable import tariff reduction on imported CBU
together explain the surge in passenger car sales and the structural change of the Thai
automotive market in 1990s. This liberalization policy of the Thai Government will be
discussed in detail in section 3.2.
Since the 1970s the Thai domestic auto market has been dominated by Japanese
auto assemblers. During the golden period of the Thai auto industry, the 1990s, Japanese
assemblers typically captured a market share of more than 90 percent every year. However,
after the ban on new assembly plants was lifted, newcomers such as Ford, GM, and BMW
have intensified the competition on the domestic market. It is reported that in 1992,
Japanese dominance was abut 95 percent but that it has gradually decreased, to 91 percent
in 1999, 88.8 percent in 2000, and to 87.2 percent in the first four month of 2001 (Bangkok
Post Mid-year Economic Review 2001). The market structure of passenger cars in
Thailand was dominated by Toyota, Honda, Nissan, and Mitsubishi, while that of
commercial cars was dominated by Isuzu, Toyota, Mitsubishi, and Nissan (see Table 3.4
and Figure 3.7). During 1995 and 1999, competition in both sectors was among

42

Table 3.4 Market Share of Automobile in Thailand (1995 and 1999)

Brand
Name

Passenger
cars
29.0
0.0
8.4
11.1
16.9
8.0
3.1
3.0
3.3
2.6
4.5
2.0
8.2
100.0

Toyota
Isuzu
Nissan
Mitsubishi
Honda
Benz
GM
BMW
Volvo
Ford
Hyundai
Daewoo
Others
Total

1995
Comm.
cars
29.1
27.5
18.2
13.1
0.0
0.3
0.0
0.0
0.1
0.3
0.0
0.0
11.5
100.0

Total
29.1
19.7
15.4
12.5
4.8
2.5
0.9
0.8
1.0
0.9
1.3
0.6
10.6
100.0

Passenger
cars
36.3
0.7
12.8
6.1
30.4
1.6
0.2
2.8
1.4
0.0
2.4
1.0
4.4
100.0

1999
Comm.
cars
35.9
37.5
7.8
10.1
0.0
0.0
0.1
0.0
0.0
6.0
0.0
0.0
2.6
100.0

Total
36.1
25.0
9.5
8.7
10.3
0.5
0.1
0.9
0.5
3.9
0.8
0.3
3.3
100.0

Source: Thamavit et al (2000), Table 6, page 29

Figure 3.7 Market Share of Automobile in Thailand (1995 and 1999)
Market Shares of Passenger Cars (1995)
Daew oo, 2.0

Market Shares of Passenger Cars (1999)

Daew oo, 1.0
Hyundai, 2.4

Others, 8.2

Others, 4.4

Volvo , 1.4

Hyundai, 4.5
Ford, 2.6

BMW, 2.8

Toyota, 29.0

GM, 0.2

Volvo , 3.3

Toyota, 36.3

Benz, 1.6

BMW, 3.0
GM, 3.1

Honda, 30.4

Benz, 8.0
Nissan, 8.4

Isuzu, 0.7
Mitsubishi, 11.1

Honda, 16.9

Mitsubishi, 6.1

Market Shares of Commercial Cars (1995)

Market Shares of Commercial cars (1999)

Others, 11.5
GM, 0.1

Ford, 0.3
Benz, 0.3

Nissan, 12.8

Toyota, 29.1

Ford, 6.0

Others, 2.6

Mitsubishi, 10.1
Toyota, 35.9

Mitsubishi, 13.1
Nissan, 7.8

Nissan, 18.2
Isuzu, 27.5

Isuzu, 37.5

Source: From information in Table 3.4

43

the incumbents. In the passenger car sector, Toyota and Honda were the leaders, while
Isuzu, Toyota and Mitsubishi were leaders in the commercial-car sector. However, in the
commercial sector, Ford offered a significant challenge. A relative newcomer, Ford started
production in 1998 and captured a market share of 6 percent in 1999. The market
competition is expected to be higher in all markets.
3.1.2 Pattern of import and export
As shown in Table 3.3, during the 1960s and 1970s, domestic production was less
than half of domestic demand. During this period, import was, consequently, the main
source of supply for the domestic market. A rough indicator in Figure 3.3 also reflects this
pattern. Since the late 1960s, the import tariffs on CBU and CKD were hiked, and many
restrictions were imposed, such as the LCR policy, since 1975, the ban on CBU import in
1978, and the ban on new assembly plants in 1978. These protection measures resulted in
substantial reduction in subsequent imports; as displayed in Table 3.5 Thailands Import
and Export of Automobile (1972 1999), import of vehicles declined steadily from 1977
to 1982. Import increased significantly again after the import ban on CBU (engine larger
than 2,300 cc.) was lifted in 1985, and the ban on CBU (engine less than 2,300 cc.) was
lifted in 1991. As already discussed, the 1990s was the golden era of the Thai automobile
industry; imports increased largely in the passenger-car sector, in which domestic
production was not sufficient for the growing demand. Imports grew substantially after the
reduction in the import tariff in 1993, but it reduced again from 1996. The depreciation of
the bath during the economic crisis of 1997 further discouraged imports in 1997 and 1998,
when imports sustained 50 and 84 percent negative growth rates, respectively (see Table
3.5).

44

Table 3.5 Thailands Import and Export of Automobile (1972 1999)

Unit: Number of vehicles
Year
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999

Passenger
car
7,248
12,780
11,639
7,864
5,366
7,002
2,487
1,166
685
400
683
767
1,922
1,292
474
4,334
6,735
7,263
10,153
12,857
22,583
44,279
36,657
41,931
25,185
10,808
1023
NA

Import
Commercial
car
17,348
29,558
30,929
38,892
31,913
33,706
24,989
17,987
7,861
6,331
4,088
7,588
7,597
4,871
2,510
4,727
3,974
1,795
3,289
11,292
19,326
12,115
4,838
6,934
8,039
5,781
1,526
NA

Total

% growth

24596
42,338
42,568
46,756
37,279
40,708
27,476
19,153
8,546
6,731
4,771
8,355
9,519
6,163
2,984
9,061
10,709
9,058
13,442
24,149
41,909
56,394
41,495
48,865
33,322
16,589
2,549
7,100

NA
72.13
0.54
9.84
-20.27
9.20
-32.50
-30.29
-55.38
-21.24
-29.12
75.12
13.93
-35.26
-51.58
203.65
18.19
-15.42
48.40
79.65
73.54
34.56
-26.42
17.76
-32.01
-50.07
-84.63
178.54

Source: Thamavit et al (2000), Table 4, page 27.

45

Passenger
car
8
0
3
3
6
2
2
10
7
2
4
1
2
12
20
488
14,121
9,032
5,826
15,688
2,384
3,781
14,294
1,623
926
564
6,773
NA

Export
Commercial
Total
% growth
car
11
19
NA
0
0
-100.00
0
3
NA
6
9
200.00
0
6
-33.00
4
6
0.00
1
3
-50.00
74
84
2700.00
35
42
-50.00
24
26
-38.00
24
28
8.00
3
4
-86.00
17
19
375.00
8
20
5.00
26
46
130.00
40
528
1048.00
314
14,435
2634.00
631
9,663
-33.00
442
6,268
-35.00
144
15,832
153.00
1,586
3,970
-75.00
8,532
12,313
210.00
7,086
21,380
74.00
7,182
8,805
-59.00
15,493
16,419
86.00
41,654
42,218
157.00
59,999
66,772
58.00
NA
125,702
88.00

Figure 3.8 Thailands Import and Export of Automobile (1972 1999)

Import and Export of Automobile 1972-1999

Import

Export

140,000

Number of Vehicles

120,000
100,000
80,000
60,000
40,000
20,000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

Import and Export of Passenger Cars 1972-1999

Import

Export

50,000
45,000
Number of Vehicles

40,000
35,000
30,000
25,000
20,000
15,000
10,000

1991

1992

1993

1994

1995

1996

1997

1998

1991

1992

1993

1994

1995

1996

1997

1998

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

5,000

Import and Export of Commercial cars 1972-1999

Import

Export

70,000

Number of Vehicles

60,000
50,000
40,000
30,000
20,000

Source: Same as Table 3.5

46

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

10,000

In terms of export, the Thai automotive industry can be said to have changed from a
domestic-oriented one into one with a more outward-looking strategy since 1987. Exports
from Thailand became viable by the end of 1987, when Nissan and MMC Sittipol (a Thai
joint venture with Mitsubishi) exported their first lot from Thailand, consisting of 40
Nissan Sunny FF to Brunei and 488 Lancer to Canada (Bangkok Post, December 30, 1987).
During 1988 and 1996, the number of vehicles exported fluctuated between 4,000 and
21,000 units a year. From 1997, exports increased sharply from 1996 from 16,419 to
42,218 units, and grew continually to 66,772 and 125,702 units in 1998 and 1999,
respectively.
Thailand became an export base for several makers for many reasons. First,
Thailand was considered by many assemblers to have great potential as an export base
because of the rapid expansion of the domestic market. Secondly, the commitment of the
Thai Government became manifest with the General Agreement on Tariffs and Trade
(GATT). Thirdly, the decision to lift the ban on new assembly plant in 1993 made the Thai
automobile industry seem more open and liberalized. Lastly, because Thailand had no
national car project, it was presumed that all investors would be treated equally.3 These
were important factors attracting many assemblers to set up operations in Thailand4; many
of them, both newcomers and incumbents, have implemented export programs. In 1996,
Mitsubishi established a clear policy to use Thailand as its center for worldwide production
of pickup trucks. Others firms such as Toyota, Ford, Mazda, Isuzu, and GM followed the
same strategy. 5 According to The Nation (October 7, 1999), automobile export from

The president of Toyota Motor Thailand said, Thailand is the best candidate for hub status because it has
no national-car policy and offers a level playing field (Bangkok Post Economic Review 1999).
4
These new comers include Chrysler, General Motors, and Auto Alliance (Thailand), a joint venture between
Ford and Mazda, and BMW Manufacturing. More discussion will be provided in the next section.
5
According to UNICO (1999, p. 3-1-4), Isuzu will transfer its entire one-ton pickup truck production from
the Fujisawa plant to Thailand by 2001. While GM will export about 80 percent of its Zafira made in
Thailand from 2000.

47

Thailand was targeted to surge from 70,000 units in 1998 to about 250,000 units by 2004.
Therefore, it can be said that the automobile industry in Thailand has successfully
developed and transformed into an export industry. Growth of export in recent years
provides clear evidence supporting this statement.
From the historical development perspective, it can be said that strict regulations by
the Thai Government have succeeded in developing the automobile industrial sector.
Equally important, it should be recognized that Japanese firms that have long dominated
the Thai automobile market play an important role in complying with those strict
regulations, though with some difficulties.6 In this sense, it is not going to far to state that
Thailands industrial sector and technological capability have been developed notably
during the past four decades. In addition, it has been argued that to gauge the benefits of
technology development, one should look at the growth of the supporting industries of the
country (Mingsarn 1993, p. 10-11). Therefore, the subsequent sections will discuss roles of
the government in designing the policy and roles of Japanese firms in response to the
government policies that contribute to the development of the automobile and auto parts
industries.
3.2 Role of Government
The automobile industry is probably the only Thai industry for which the
government has specific goals and policies.7 As will be discussed below, from the earliest
stages the industry had been protected by various import restrictions, and by very high
tariffs for the last three decades. These policies were designed to protect the domestic
automobile industry from overseas competition and to promote the Thai parts and
component industries. Therefore, this section sets the scenario for examining the roles of

Takeuchi (1991, p. 214) has noted, it was a tough job for Japanese firms to follow the frequent changes of
policy.
7
Mingsarn Kaosa-ard. (1993). TNC Involvement in the Thai Auto Industry, TDRI Quarterly Review, 8(1).

48

Thai Government in promoting the automotive industry. The general discussion of the
overall trend of the industry, in terms of production, sales, import and export in the
preceding section, showed the Thai auto industry has developed significantly within the
last four decades. The subsequent discussion will be divided into three subsections, in
accordance to the time period of which major automotive policies were launched; they are:
1) the import substitution period (1960-1970), 2) industrial rationalization through
localization policy (1971-1986), and 3) export and semi-liberalization (1987-1999).
3.2.1 Early promotion and protection of the domestic market (1960 to 1970) 8
Before 1961, all automobiles were imported to Thailand. They were imported from
Europe, America, and Japan. Thailand pursued its economic development through import
substitution policy and introduced the Investment Promotion Act of 1960 to establish the
Board of Investment (BOI) in this early stage of development. (Mingsarn 1993, Noppadol
1995).
The automobile industry was offered privilege from the BOI to enjoy a 50 percent
reduction of import duties and business taxes on CKD. Between 1962, import duties on
CBUs were 60 percent for passenger cars, 40 percent for commercial vehicles and 20
percent for trucks; hence duties on CKD units for local assembly were 30, 20 and 10
percent, respectively. These incentives encouraged a number of multinational automobile
manufacturers from Japan, the US and Europe to set up joint ventures to assemble
passenger cars and commercial vehicles from CKD and semi knocked-down (SKD) kits for
the domestic market. Japanese firms were at the forefront of the influx of foreign
assemblers; Nissan established an operations plant in 1962, Toyota in 1964, Prince in 1965,
and Isuzu, Hino and Mitsubishi in 1966 (see Table 3.1). By the end of 1960s, there were 13

For a review of early incentives, see Nawadhinsukh (1983), Ancillary Firm Development in the Thai
Automobile Industry, in K. Odaka, The Motor Vehicle Industry in Asia, Singapore: Singapore University
Press.

49

assemblers, five of which were Japanese-related enterprises Siam Motor & Nissan,
Toyota Motor Thailand, MMC Sittipol (Mitsubishi), Isuzu Motor Thailand, and Thai Hino
Industry (see Table 3.1).
Nevertheless, the policy makers revised the import substitution policy at the end of
1960s because of its failure to alleviate the trade deficit. Due to the underdevelopment of
auto-parts and other supporting industries, for which Thailand had no production
experience, most of production consisted of assembly of imported components and parts.
This accounted for the steadily worsening trade balance. To solve this problem, the
Ministry of Industry (MOI) established the Automotive Industry Development Committee
(AIDC) under the Cabinet Resolution in August 26, 1969, in order to impose policies and
measures for the automobile assembly industry (MOI 2001). This was the first step by
means of which the Thai Government began to play an active role specific to the
automobile industry. The establishment of the AIDC led to a new rationalization plan for
the development of the Thai automobile industry. The AIDC became an important policy
designer shaping the development of the Thai automobile industry subsequently. Behind
the successful launch of the LCR policy was collaboration among assemblers, the Thai
industrial association and the AIDC. Congruence between the objectives of business firms
and the goals of government helped shape and design the Local Content Requirement
(LCR) policy, which was the most important policy in promoting the automobile industry
(Pacharee 1997, p. 13-14). At the end of this stage, the BOI stopped granting promotional
privileges to new assembly plants, and the automobile industry came under the direct
jurisdiction of the AIDC (Siriboon 1983, 187).9

Kuroda (2001, 164) points out that BOI stopped granting privileges in order to control the number of
assemblers because too many producers and models would threaten the efficiency of local part production.

50

3.2.2 Industrial rationalization through local content requirements (1971 to 1986)

In July 1971, the Ministry of Industry announced rationalization guidelines
restricting the number of models produced domestically. According to the guidelines, an
assembly plant was required to produce either passenger cars or commercial cars. Existing
assemblers of passenger cars were permitted to produce no more than three models, of
which only one model could have larger 2,000cc engine size, effective 1 July 1972.
Existing producers of commercial vehicles were not allowed to produce more than five
models, while new assemblers were limited to just three models. Doner (1991, p. 198)
remarked that in 1975 production capacity was about six times larger than demand. Hence,
these restrictions can be regarded as demonstrating the Governments intention to promote
economies of scale production efficiency (Pacharee 1997, p. 15).
Since January 1st, 1975, a local content requirement had been introduced at 25
percent for passenger cars, 20 percent for commercial vehicles with windshields and 15
percent for commercial vehicles without windshields. The percentage of the local content
was subject to the following formula;
LC= A / A+B
Where LC = percentage of local content,
A = the total value of local purchasing auto-parts
B = the c.i.f. value of imported CKD plus import tariff and business taxes

Nevertheless, there were several problems with this formula. The quality of local
parts was still poor and the price relatively higher, which gave local auto assemblers less
incentive to use them. Japanese automakers then tried to comply with the LCR policy by
inviting their suppliers to invest in Thailand. For example, Toyota asked NHK to invest in

51

Thailand in 1963, Aoyama in 1965, and Nippon Denso in 1972 (Pacharee 1997, p. 15).10
This formula provided a window for multinational firms to raise the ratio of A, through
transfer pricing, in order to make the LC became bigger (Siriboon 1983, p. 189). Hence,
implementation of this LCR was not the success the Government expected, i.e., a reduction
of the trade deficit while promoting the use of local parts. Moreover, expensive models
hardly achieved the LC since assemblers needed to import higher value of B items, which
no firms in Thailand were capable of producing. No further attempt to achieve higher ratio
of local content was made in any model produced.
Consequently, in September 1978, new local content requirements were announced.
According to these regulations, the domestic production of passenger cars had to use 35
percent local contents within two years, and going up five percent every year thereafter, to
50 percent in 1983. In the following year, the local content for commercial cars was set for
the next five years (1981-1985) as follows;

Bare chassis with engine; 15% to 40%

Windshield chassis: 20% to 45%

Cab chassis: 25% to 50%

Furthermore, the method of calculation was changed from the previous formula.
The calculation was now subject to relative points assigned to each individual part, taking
into account many aspects, such as value of the item, its availability, and technological
feasibility of manufacturing it in Thailand. 11 Assemblers were obliged to select locally
produced parts up to the specified points. Though the assigned points, calculated by this
formula, did not have a direct relationship with the value added of parts (given the

10

Busser (1999, p. 188-189) notes that the motivation for invitation NHK and Aoyama was to circumvent
high import tariff on auto parts. Roles of Japanese firms in developing the supporting industry will be
discussed in the next section.
11
Interview with Mr. Udom Wongwiwatchai by Pantareeya (1995). Cited in Pantareeya (1995: 33). Details
of percentage points assigned, see appendix A and B.

52

Governments objective to reduce trade deficit), its clear definition and given points made
it much easier for assemblers to make localization plans. This was believed to stimulate the
development of auto parts industry in Thailand, as well as to avoid the problem of transfer
pricing (Busser 1999). Also, the same year, the government completely banned CBU
imports and increased import duties on CKD kits to 80 percent. Figure 3.9 below shows
the movement of LCR in the automobile assembly from 1975 to 1999.
Figure 3.9 Local Content Requirement of in Automobile Assembly
80
70

Passenger car

Percentage

60
50

Pickup (gasoline
engine)

40
30

Pickup (diesel engine)

20
10
0
19
99

19
97

19
95

19
93

19
91

19
89

19
87

19
85

19
83

19
81

19
79

19
77

19
75

year

Note: - The local content from 1986-1988 is approximated from the additional mandatory items.
- 1985 was the first year that government gave the definition of pickup car.
Source: Supawan 2000, Figure 2.1, page 23.

In 1980, the AIDC further announced seven compulsory parts (or mandatory items)
for trucks, all of which were available in the market. They were radiators, batteries,
exhaust pipes, mufflers, tires and tubes, safety glasses, drum brakes and disc brakes. It
should be noted also that there had been political lobbying by some influential firms.12

12

For example, Mingsarn (1993) reported that a big local joint venture firm between Japanese and Thai used
its political influence to request the government to adopt the first mandatory localization of brake drums and
major parts for pickup. This firm made a request for the mandatory localization of brake drums after it had
proven capacity in machining and casting despite a lack of competitiveness in the market. See also Pacharee

53

Implementation of the LCR policy clearly promoted the development of supporting

industries, especially in metal, plastic, rubber parts, and complete motor vehicle systems.
Therefore, it can be said that LCR policies and other measures (limits on vehicle types,
limits on models and engine sizes, and minimum capacity and investment) were highly
successful because they encouraged the emergence of local supporting industries in
Thailand. BOI (1993, p. 18) notes that the localization programs adopted in this period
strongly generated high demand for metalwork parts (casting, forging, machining,
stamping, welding, electroplating, and heat treatment). Several local parts-production
businesses emerged because of this policy. Siam Iron and Steel, for instance, which had
produced and supplied steel for cement and machinery plants, diversified into the Siam
Nawaloha Foundry and produced various automotive casting parts. Siam Machinery and
Equipment, Burapa Steel, and Somboon Spring Industrial also expanded their businesses.
In addition, it turned out that many parts such as exhaust systems, brake systems,
fuel systems, suspension systems, lighting systems, pressed parts and assemblies, and
interior trim could be manufactured or assembled locally. Nevertheless, local firms could
produce only those technically simple parts and components e.g., alternators, exhaust
pipes, filters, radiators and starters while the more sophisticated parts were produced by
Japanese affiliates and Thai-Japanese joint ventures (BOI 1995).
Small stamping parts also showed significant growth. Some assemblers, such as
Siam Nissan (in 1974), Toyota Autobody (in 1978), Isuzu Body (in 1978), initiated inhouse production (or production by their affiliates) of stamping parts. Local part makers in
this field included Ch. Autopart, Sammitr Motors, Sri Thai Pressing. In 1977, it was
estimated that Thailand had some 180 parts suppliers (Doner 1991). The Thai automobile
industry could eventually go beyond the assembly process, which was a common
(1997) about the political influence by local part makers on the policy makers in the Thai automobile
industry.

54

characteristic in the first stage (1960-1971). The significant growth of local supporting
industries during this period can indicate the success of the LCR policy.
3.2.3 Export and semi-liberalization period (from 1987 to the end of 1999)
Since 1987, the Thai automotive industry has been characterized by a transition
from domestic-oriented production towards greater liberalization, and the overall industry
has developed a more outward-looking strategy. Not only did Thailands automobile
exports become evident, a number of parts and components firms succeeded in breaking
into export markets, especially for safety glass, ignition coils, wiring harnesses, air and oil
filters, and related products (Abdulsomad 1999, 282). As mentioned in section 3.1,
Thailand began exports of automobiles in 1987, initiated by Siam Nissan and MMC
Sittipol.
With respect to policies implemented to promote the development of local
supporting industries, a new revised mandatory and selective items list was imposed and
the minimum local content requirement was set at 54 percent from January 1st, 1987. The
objective of this policy was clearly to transform the industry from pure assembly to semimanufacture through the compulsory use of LCR policy (Busser 1999, p. 178). This LCR
was finally frozen at its maximum of 54 percent for passenger cars, and 70 percent for oneton pickup trucks in 1991.
With the high demand for pick-up trucks and the localization policy, plans to
establish local production of engines, dropped in the early 1980s, were revived. The AIDC
required the assemblers of pickups with engine capacity up to 2,500 cc. to use locally
manufactured engines. Imports of engines were banned, and a progressive local content
requirement program began. A summary of major automobile industry policies is shown in
Table 3.6. In response to this policy, four automobile assemblers initiated their engine
manufacturing in Thailand. Three Japanese joint ventures including Toyota, Thai
55

automotive (a subsidiary of Nissan), and Isuzu were promoted by the BOI, while
Mitsubishi was promoted by the MOI for the assembly of diesel and gasoline engines
(Supawan 2000, p. 25-26). As a specific result of BOI promotion, five engine parts,
namely, cylinder block, cylinder head, crank shaft, cam shaft, and connecting rod, had to
be produced locally. At present, these five compulsory items are produced locally, and the
local content of diesel engines produced in Thailand is higher than 70 percent (Supawan
2000).
Since the engine is considered the most important part of an automobile and
requires very sophisticated technology to produce, the development of this industry and its
downstream supporting industry in Thailand indicates that the technological capability of
the Thai automotive part industry has developed significantly. Japanese car makers should
also be credited for their great contribution, especially in terms of technology transfer.
Apart from the LCR policies, more liberalization policies implemented by the
government in 1990s brought about substantial changes to the Thai automobile industry.
Three major policy frameworks were enacted chronologically and resulted in the
development of Thailands automotive sector into an internationally competitive industry.
During the first step, in 1991, the Anand Government lifted the import ban on CBU cars
and completely restructured the tariff system on automobiles and auto parts in July 1991
(BOI 1995). These decisions forced the Thai assembly and auto parts industries to improve
efficiency and produce higher quality cars to meet international standards for export. Also,
the Thai government revised and approved restructuring the import duty on CKD kits and
CBUs; in this way, the automobile industry has begun preparing itself for increased
competition from international manufactures. Consequently, the government decided to
slash import duties on motor vehicles. Sharp reduction in import tariffs in 1991 are readily
evident in Figure 3.10, showing the overall movement of import tariff from 1961 to 1999.

56

Table 3.6 Thailands Major Automobile Industrial Policies (1961 2000)

Year

Policy

1961

1960 Industrial Investment Promotion Act provides incentives for the automobile
assembly plants. Assembly operations established using CKD kits.
BOI, established under the 1962 Industrial Investment Promotion Act granted privileges, especially
1962
a 50 percent reduction in tariffs and trade taxes on CKD kits. Tariffs on imported CKD
kits for passenger cars (PCs), pick-ups (Ps) and trucks (Ts) were 30 per cent,
20 per cent and 10 per cent, respectively.
The MOI established the Automotive Industry Development Committee (AIDC) to impose policies
1969
and measures with an aim for auto-assembly establishment.
20 per cent increase in tariffs for imported CKD kits for PCs, Ps, and Ts
( new rates: 50 per cent, 40 per cent and 30 per cent, respectively).
1971
MOI restricts the number of locally assembled PCs, Ps and Ts.
AIDC announced a minimum local content requirements(LCRs) to be effective in 1974.
1975
LCR became effective (25 per cent for PCs from January).
1976
Number of locally assembled PC models limited to twenty-four;this limit was
subsequently lifted by the MOI.
1978
The Government banned CBU imports and increases import duty on CKD kits to
80 per cent.
The MOI annouced new regulations for LCR for car assembly to increase from 25 to 50 percent
within 5 years.
The Government banned new assembly plants due to over-capacity.
Tariffs on CBU PCs increased to 150 per cent and on CKD PCs to 80 per cent.
1980
The AIDC announced seven required parts for truck assembly, including radiator,
exhaust pipe set, battery, leaf spring, tires and inner tube, safety glass, and drum brake.
1982
LCRs for all vehicles frozen at 45 per cent.
1985
Mandatory local-content list imposed.
Ban on imported CBU vehicles (with engine over 2,300cc) lifted.
1986
LCRs for passenger cars raised to 54 percent and 61 - 70 percent for commercial vehicles*
List for compulsory (List A) and non-compulsory parts (List B) imposed.
The BOI promoted domestic production of diesel engine for one-ton pickup
1989
Ceiling on production capacities at existing assembly plants lifted.
Localization of diesel engine under BOI promotion should be at least 20% and increase 10% every
year until 80%**
1991
Ban on imported CBU cars lifted.
Tariffs reduced for all imported CBUs and CKD kits.
1993
Ban on new assembly plants lifted.
1994
New excise tax category for off-road vehicles.
1995
BOI plan to promote new engine assembly operations.
New exhaust emissions schedule announced.
1996
MOF new vehicle financing regulations.
1997
Mandatory inspection of 5-year-old cars.
Stricter emission standards enforced on diesel fuel vehicles.
1998
Projected date of LCR termination
2000
LCR terminated
Imported tariff for CKD increased from 20 to 33 percent
Excise tax reduced
Note: * 61 percent for commercial cars with gasoline engine and 70 percent for those with diesel engine
to be effective in 1987
** The regulation for BOI promotion for domestic production of diesel engine for pickup was
revised in 1993 and 1995, in order to extend the period until June 1998 and the
maximum local content requirement to be 70%
Souce: Board of Investment (BOI), Bank of Thailand (BOT), Ministry of Industry (MOI), and
Abdulsomad (1999) Table 11.1, page 283

57

Figure 3.10 Tariff of CBU (Complete Built Up) Cars

T a ri f f (% )
200
180
160
140
120

p as s en g er car

100

P i ck u p car
Tru ck

80
60
40
20

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

Source: Supawan (2000, p. 42)

Then, in 1993, the ban on new assembly plants, which had been in effect from 1978,
was lifted. The effect of this policy shift was strong; it significantly transformed the Thai
automobile industry from a highly protected industry to a more liberalized one. Many
Japanese and U.S. automobile assemblers and auto parts manufacturers are turning
Thailand into a major assembly and component manufacturing export base for their global
operations.13
Moreover, according to the commitment of the Thai Government with the General
Agreement on Tariffs and Trade (GATT) in 1993, the Thai government had to reassess the
import duty structure for finished vehicles, kits, components, as well as raw materials, and
to plan for the gradual phasing out of local content regulations. This action has accelerated
the liberalization process of the industry to be more outward orientation. Combinations of

13

Many automakers have implemented export programs. In 1996, Mitsubishi put clear policy to use Thailand
as its center for worldwide production of pickup trucks. Others firms such as Toyota, Ford, Mazda, Isuzu,
and GM (a new comer) followed the same strategy. According to The Nation (October 7, 1999), automobile
export from Thailand was targeted to surge from 70,000 units in 1998 to about 250,000 units by 2004.

58

these policy changes are important factors attracting many assemblers to set up operations
in Thailand. These newcomers include Chrysler, General Motors, and Auto Alliance
(Thailand), a joint venture between Ford and Mazda, and BMW Manufacturing.14 The entry
of these globally competitive assemblers undoubtedly led to an intensification of
competition among automobile manufacturers in Thailand.15 In late 1990s, many big worldclass part suppliers, such as Delphi Automotive system (GM supplier), Visteon and Hella
Climate Control (Ford Suppleirs), Sekurit Saint Gobain, and DANA Spicer, established
their factories in Thailand, following their customers relocation. Hence, not only did the
liberalization policy bring about higher competition in automobile market, it had a similar
effect on the auto parts manufacturing sector.
Products for export require higher quality than domestic products, so improvements
in the quality of parts are critical for local part firms. The procurement trend then moves
toward a global parts-sourcing strategy. Although major car makers affirm that they are
committed to Thailand as their production base, and their purchasing decisions would
focus first on local parts, the final decisions depend on quality and price competitiveness
(Bangkok Post, May 2, 2000). Local parts makers will certainly face difficulties unless
they improve quality and offer competitive prices to the buyers. However, the financial
crisis in 1997 added to the difficulties of local parts firms. Those difficulties went beyond
technological capacity to include financial solvency. According to the Bangkok Post (April
15, 2000), more than 600 auto parts firms have been closed or taken over by foreign firms
since the crisis struck. Jeopardized by the economic crisis, local firms restructuring plans

14

It was reported that the Ministry of Industry had assured GM several times that Thailand would stick to the
liberalization plan, namely lifting the LCR and cutting import tariff on raw materials, because of fears that
GM might scrap the project (The Nation, October 27, 1997). This statement shows the strong influence of
liberalization policy and investment decision by this American firm. To BMW, the strategic decision to
invest in Thailand was the potential market and capability to be an export base (www.autoasia.com/interview/interview.2000.05.30.01.shtml).
15
A clear phenomenon is the challenge of Ford in the pickup truck sector that it could grasp the third place of
sales in 2000, and took almost 7% of the total market share in 2001.

59

were focused on downsizing and search for foreign partners to be sources of financial and
technology.16
Given the projected date to abolish the LCR, January 1, 2000, and the downturn of
the economy since 1997, the Thai Government considered that the most important issue
was to help local part makers reduce costs and acquire technology. The Ministry of
Finance has revised the import tariff structure, especially on raw material, in order to lower
production costs of local parts production. By January 1, 2000, the Thai government had
terminated the LCR but it also increased the import tariff on CKD for all types of vehicles
from 20 to 33 percent while simultaneously reducing excise tax by 2 to 3 percent. These
steps were undertaken to keep price from going up, to protect the customer and at the same
time to protect the local parts makers from the abolishment of LCR, see Table 3.7.17
Just after the crisis, in August 1997, the BOI had been asked by auto parts makers
to increase the limit on foreign equity holding in order to acquire more liquidity (The
Nation, August 30, 1997). The BOI has relaxed the equity condition, allowing foreign
investors to own 100 percent of any industrial project in any zone without being required
to export the products. According to The Nation (November 19, 1998), this new promotion
scheme became effective in November 1998. Its main objectives were to increase the
liquidity of local small and medium scale enterprises and, at the same time, to raise quality
standards. There is a promotional condition that the new projects need to be accredited ISO
quality certificate within two years of being granted the privilege.

16

Even one of the Thailands largest auto parts manufacturers, the Somboon group, still needed to restructure
its business from 16 subsidiaries to focus only three core businesses. A vice president of the Somboon group
disclosed lack of investment capital prevented many firms completing needed machinery upgrades to
comply with tougher sourcing standards (Bangkok Post, May 2, 2000). Another example is of a local
medium-sized company, Taveechai Brakeshoe (Thailand). The company sold of 49 percent of its equity to
acquire 500 million baht for reducing its debt burden. But the managing director also pointed out that his
company also received technology transfer from its strategic partner (The Nation, July 24, 1999). These two
examples clearly support the argument that Thai firms lack of both technology and financial resource.
17
In July 2000, the cabinet further approved tariff reductions on 542 product lines, most of them were
primary raw material unavailable locally, in order to reduce production costs and improve export
competitiveness (Bangkok Post, July 5, 2000).

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