2009 03 Eco Car Policy In Thailand Impact On The Global Car Market Frost & Sullivan

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Thailand has an ambition of reaching the 2 million mark in production by 2012. They are always in search of products that are emerging and have tremendous export potential. With pick-up trucks they crossed the 1 million mark and became the second biggest pick-up truck manufacturer in the world. Discover how your markets would be impacted by Thailand\'s Eco car policies and what opportunities are offered by this policy.

Frost & Sullivan Program Leader, Victoria Ng, addresses the following questions in this presentation:

* What is the progress of the Eco Car Policy in Thailand?
* Who is participating and who is not but competing in the same segment?
* What is the impact of Eco Car Policy in Thailand on ASEAN, EU and U.S.?

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2009 03 Eco Car Policy In Thailand Impact On The Global Car Market Frost & Sullivan

  1. 1. Eco Car Policy in Thailand: Impact on the Global Car Market March 2009 “We Accelerate Growth” 1
  2. 2. Agenda 1 Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 2
  3. 3. Thailand, traditionally dominated by one ton pick-up trucks, sees sharp growth of passenger car sales in 2008 Eco Car: Total Industry Volume (Thailand), 2006 - 2008 TIV: 682,161 -7.5% • Thai automotive market shrank due to domestic TIV: 631,251 -2.5% political turmoil and global economic crisis TIV: 615,270 • Down by 2.5% over 2007 with volume of 615,270 • Domestic pick-up truck sales are dwindling • % contribution of pick-up trucks has dropped from 66% in 2006 to 54% in 2008, have lost a volume of over 115,000 units • Passenger car sales are growing sharply, have added a volume of about 35,000 units and their contribution has grown from 28% to 37% 2006 2007 2008 Source and Analysis: Frost & Sullivan 3
  4. 4. Context of Eco Car Program • Thailand has become a production hub by crossing 1 million mark with this “product champion” • Their ambition is to cross 2 million mark by 2012 • Demand for pick-up truck may not help them to achieve this level of production • Therefore, Thailand is looking for another “Product champion” that would help them to meet the target • Therefore, Eco car concept was conceived by Thailand • Objective of Eco car program is help achieve Thailand 2 million units of production by 2012 4
  5. 5. Agenda 1 Overview of Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 5
  6. 6. What is eco car? Energy Consumption • Gasoline/Diesel <= 5L per 100 km • CO2 <= 120g per 100 km Environment Friendly • Euro 4 and higher Safety Standard • UNECE 94 & 95 safety standard • Eco car is an idea conceived in 2007 to reduce energy consumption, preserve the environment and lessen • Eco car is an idea conceived in 2007 to reduce energy consumption, preserve the environment and lessen dependence on imported oil. dependence on imported oil. • Eco car parameters are in line with the growing consumer demand for safer, more fuel efficient and • Eco car parameters are in line with the growing consumer demand for safer, more fuel efficient and environmentally friendly modes of transportation, without sacrificing in the areas of comfort and safety environmentally friendly modes of transportation, without sacrificing in the areas of comfort and safety 6
  7. 7. Classification of Eco Car A Category • Meets all requirements of eco car • 350K to 450K baht (9.8K to 12.7K USD*) B Category • Higher level of technology • 500K to 600K baht (14.1K to 16.9K USD*) C Category • Hybrid electric eco car • Very highly priced i.e. Above 750K baht (Above 21.1K USD*) *Price levels are not specified in Eco car program. Price ranges are indicative only 7
  8. 8. What are the attractions and conditions stipulated on the vehicle manufacturers? Benefits Up to 90% reduction 17% tax (<1,300cc petrol car, 8 years Exemption on of import duties <1,400cc diesel car) - leads to machinery duty import and on raw materials and lower prices of Eco car corporate income tax parts, depending on type of (~USD2k cheaper ) product Conditions • Production of 100K units on the 5th year with a minimum investment of 5 billion baht - car assembly, • Production of 100K units on the 5th year with a minimum investment of 5 billion baht - car assembly, engine manufacturing and component - excluding cost of land and working capital engine manufacturing and component - excluding cost of land and working capital • Should meet requirements of Eco car: Energy, Emission and Safety • Should meet requirements of Eco car: Energy, Emission and Safety • Manufacture at least 4 out of following 5 key engine parts namely Cylinder Head, Cylinder Block, • Manufacture at least 4 out of following 5 key engine parts namely Cylinder Head, Cylinder Block, Crankshaft, Camshaft and Connecting Rod, and the process of machining Cylinder Head, Cylinder Crankshaft, Camshaft and Connecting Rod, and the process of machining Cylinder Head, Cylinder Block and Crankshaft must be included in the project Block and Crankshaft must be included in the project 8
  9. 9. OEMs involved in Eco Car Project: Eligible companies must manufacture no fewer than 100,000 units per annum from the fifth year Eco Car: Eco Car Project (Thailand), 2009 Eco Car: Eco Car Project (Thailand), 2009 Capacity Investment Models Planned Probable Eco OEM /Year (Billion that Have Already Target Market Models (Unit) THB) Gained Approval • 1.3-L gasoline sedan • Honda Jazz, but with 3 based on global cylinder 1.2 litre engine • 6.2 • 50% domestic WOW concept small • By Honda car • 50% export to 120,000 Automobile ASEAN, Asia and • 2-3 models on same Thailand Europe platform Honda • Mitsubishi Concept X 1.3L or a 660cc version • 12% domestic • 4.71 • 1.3-L gasoline sedan • 88% export to 107,000 • By MMC • 2-3 models on same ASEAN, Asia and Japan platform Europe Mitsubishi 9
  10. 10. OEMs involved in Eco Car Project: 2/3 Capacity Investment Models Planned Probable Eco OEM /Year (Billion that Have Already Target Market Models (Unit) THB) Gained Approval • 1.1-1.3-L gasoline • Toyota Passo 1.2 or sedan 1.3 diesel - gearbox • Rebadged MyVi, from India • 50% domestic • 4.64 followed by second • 50% export to • By Toyota 100,000 generation Boon ASEAN, Asia and Motor Passo possibly Europe Thailand • MyVi or a new global A segment car Toyota developed by TMT • Tata Nano 3 cylinder 42% domestic • 1.0-1.3-L gasoline & • 623cc 1,3-L diesel Tata X4 • 58% export to • 7.4 100,000 Sedan ASEAN, Asia & • By Tata India • At least two models South Africa Tata on same platform 10
  11. 11. OEMs involved in Eco Car Project: 3/3 Capacity Investment Models Planned Probable Eco /Year (Billion that Have Already Target Market Models (Unit) THB) Gained Approval OEM • 1.1-1.3L gasoline • Nissan Micra 1 liter 3- sedan cylinder Xtronic CVT • 10%-15% • 5.5 • Probably next domestics 120,000 • By Nissan generation • 85%-90% export to Japan Mirca/March ASEAN, Asia and • At least two models Australia Nissan on same platform • 1.1-1.3L gasoline • Suzuki Cervo 3 sedan cooperation cylinder 660 cc • 10%-15% with GM domestics • 9.7 • New global small car • 85%-90% export to 138,000 • By Suzuki on splash platform ASEAN, Asia and Japan will be Eco car, or Australia Suzuki next generation Wagon R 11
  12. 12. Agenda 1 Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 12
  13. 13. Eco car production is expected to gradually reach the 700K mark by 2015 Eco Car: Production Forecasts of Eco car vehicles (Thailand), 2009-2015 800,000 700K in 2015 700,000 600,000 Vehicle Production 500,000 400,000 300,000 200,000 100,000 40K in 2009 0 2009 2015 Year • This is based on the production target of vehicle manufacturers and the foreseeable market condition: • This is based on the production target of vehicle manufacturers and the foreseeable market condition: domestic and export domestic and export • Honda to commence production in 2010 • Honda to commence production in 2010 • Most automakers to start in 2011 hence by 2015 many would be able to achieve full production to • Most automakers to start in 2011 hence by 2015 many would be able to achieve full production to bring total to 700K bring total to 700K 13
  14. 14. Key Drivers & Restraints for Eco Car Production Eco Car: Key Drivers & Restraints (Thailand), 2009-2015 Eco Car: Key Drivers & Restraints (Thailand), 2009-2015 New model launches to Demand for boost sales fuel efficient A number of FTAs cars in Export market of passenger (India, Australia, Thailand and potential (about cars Korea & Japan) in in the region 70% of total place would benefit Drivers production) Thailand eco car project Impact Markets that Restraints Price pressure are potentially from small lucrative like Economic cars imported Indonesia is Frequent downturn from Malaysia quite averse political turmoil would take toll on the idea of Uncertainly and unrest on consumer accepting eco over oil prices undermines confidence, cars as CBU confidence credit availability Source: Frost & Sullivan 14
  15. 15. Agenda 1 Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 15
  16. 16. The global automotive market is expected to contract at a CAGR of more than -4% between 2007 and 2010 Global Sales Volumes of Light Vehicles, 2008 CAGR: –4.1% 63.8 million 56.2 million 6.3m 7.9m 2.4m 1.7m 2.1m 0.49m 0.54m 0.53m 2.7m 0.43m China Brazil India Units (Million) 2007 2010 Note: CAGR calculated for 2007 to 2013; All figures are rounded; the base year is 2007. Source: Frost & Sullivan 16
  17. 17. Current Global Business Environment Poses Huge Challenges with Opportunities along-side Opportunities and Threats in Global Automotive Market, 2008 Sustained Increasing Higher tax burden on Demand for Green Increase in Demand demand in Emerging cars with higher Technologies, Electric for Small, Low-cost Markets emissions Vehicles and Hybrid and Fuel-efficient cars Powertrain Fluctuation in CO2 Legislation Commodity prices Opportunities Unstable Business Environment Threats Falling Company Global Credit Valuations and Earnings Crunch Cut in Production Reduced Consumer Capacity and Consumption & Rapidly Declining Vehicle Falling Consumer Workforce Expenditure Sales in Q3 2008 and a Confidence weak outlook for 2009 Source: Frost & Sullivan 17
  18. 18. Small, affordable and clean cars are mega trend in the auto industry in the next 5 years: Eco car likely to be biggest gainer Global Sales Volumes of Light Vehicles – by Vehicle Segment, 2008 • Basic and small cars have a 18.9m strong sales trend in Europe 13.2m and Asia at present making 10% 6.0% 5.0m one fourth of the market size Vans 13.5m 9% 9.9% 15.1% Vans • USA to witness a strong 9.6% 13% 10.6% growth of Small cars and Vans 42% 7.0% super-minis in 2009 and 10 11.9% 6.6% 26.9% 9.2% • Pickup sales expected to reach 7.1% close to 1m units, while SUVs 10.1% 30% are expected to sell 1.3m 11.3% 6.5% units in Asia by 2010 22.4% • Asia and Europe are big 6.8% 25.0% markets for commercial Vans, 41% 14.8% 9.6% while Japan has Vans in the 4.5% 49% 18.8% 7.8% passenger segment too 11.6% 13.9% 12.5% 16.1% 6.7% 4.0% Europe USA Asia* Japan (including Russia) Source: Frost & Sullivan Basic Small Low Medium High Medium Large Low Luxury High Luxury Super Luxury MPV *(India, China, Thailand, Malaysia, SUV Pickup / Truck Sports, Van & Others Indonesia, Korea) 18
  19. 19. Lowering green house gas (CO2) emission and reducing energy dependency are the drivers: Eco car fit in well in this trend as well Legislation (Emission) and Environmental Impact on Global Automotive Industry (Passenger Cars), 2008 Euro IV Euro V Euro VI Electric vehicles for low CO2 emissions Europe CO2 based taxes in Germany, UK, Benelux Electric vehicles & Plug-in Hybrids in US CAFE startin MY 2011, 35mpg by MY 2020 USA Tier 2 Emission Standards Euro V Euro VI Euro II PROCONVE L-4 (Euro III) PROCONVE L-5 (Euro IV) Bio fuels Bio fuels with 25% ethanol mix in Brazil Brazil (20–25% ethanol) Euro IV introduced in Beijing in 2008 Russia Euro II Euro III Euro IV Euro V Euro II National Std III (Euro III) Euro IV China Bharat III Stds. in India (equivalent to Euro III) Bharat IV (equivalent to Euro IV) India Euro IV rolled out Electric vehicles in Israel first in Top 10 Others Indian Cities and later nationwide 2005 2008 2010 2012 2015 Key Driver Emission Standards Emission-based Taxation Reducing energy dependency Note: * CAFE - Corporate Average Fuel Economy Source: Frost & Sullivan 19
  20. 20. Eco Car has a huge potential in Europe, US and Asia Eco Car can potentially target volume of 43% of the addressable volume is in 11.23 million Europe • Eco car program has a huge potential. It can target a volume of 11.23M in key markets such as • Eco car program has a huge potential. It can target a volume of 11.23M in key markets such as Europe, US and Asia Europe, US and Asia • Bulk of the volume lies in Europe. 4.8M cars which constitute to 43% of the addressable markets • Bulk of the volume lies in Europe. 4.8M cars which constitute to 43% of the addressable markets followed by Asia followed by Asia • This indicates that Eco car is a product with huge potential, which can potentially be Thailand’s next • This indicates that Eco car is a product with huge potential, which can potentially be Thailand’s next product champion after pick-up trucks product champion after pick-up trucks 20
  21. 21. Eco car would predominantly be a exported to Europe and Asia, particularly Australia and ASEAN Eco-Cars (700k) CBU Export (70%) CKD Export (20%) Domestic Market (10%) • CKD parts have to be the key engine components • Model variants of similar platform manufactured in Thailand • Fuel efficient acceptable specifically for eco car. • Environment friendly • But as per specifications and • 40% local or ASEAN content in • First time buyers likely to be requirements of Eco car regardless order to export to ASEAN under attracted of destinations AFTA • Meets stringent EU standards • ASEAN country like Indonesia may choose this to support local industries 21
  22. 22. Impact will be Global Eco Car: Impact on Automotive Market (world), 2009-2015 Eco Car: Impact on Automotive Market (world), 2009-2015 Europe • The Eco-car specification is designed to meet the European requirements • Significant volume will still be Australia produced in Europe to satisfy the • Australia would be one of the initial diesel vehicle demands export target for Thailand’s eco-car • Eco-car could dominate the Australian vehicle landscape North America • The eco-car would replace much of ASEAN the US small car import from Japan • Malaysia is currently the largest passenger car • The challenge would be to meet the market in ASEAN, however its AP license regulatory requirements for passive restrict the potential sales volume in Malaysia safety systems • The focus would be on emerging economy like Vietnam and Philippine where local production is making limited progress 22
  23. 23. Issues with Eco Car Program: Opportunity for non-Eco Car Players in Thai Market 23
  24. 24. Agenda 1 Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 24
  25. 25. Conclusions Thailand Eco car policy is likely to help them achieve their ambition to reach 2mn vehicle production, although there would be some delay in achieving these numbers due to current slow down Current global trends support fundamental premise of Eco car: Small, fuel efficient, environment friendly , safe car Europe, Australia and ASEAN would be key export markets for Eco car program Although there are some aspects of Eco car program that would give a window of opportunity for non- eco car players in Thai market in short term 25
  26. 26. Agenda 1 Thailand Automotive Market 2 Eco Car Project in Thailand 3 Outlook of Eco Car Project 4 Impact on Global Car Market 5 Conclusions and Way forward 6 Next Steps 26
  27. 27. Next Steps Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) Register for the next Chairman’s Series on Growth on 21 April 2009 (Tue) 11am SGT: Investing in Your Company’s Growth Potential: Plotting Your Course Along the Growth Excellence Matrix (visit http://www.frost.com/growthapac) Join us at a Growth, Innovation and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth (visit www.frost-gil.com) Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (email apacfrost@frost.com) 27
  28. 28. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 28
  29. 29. Contact Us If you have questions or would like further information about anything we discussed, please send your query to the email provided below and we will get back to you shortly. Alvin Chua Account Manager Automotive, Transportation & Logistics DID: +65 6890 0997 Mob: +65 9199 4566 eMail: alvin.chua@frost.com 29

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