FTA with Thailand : Indian AutoComponent Industry Perspective Pallav Vikash Chatterjee
Objectives of Study• To assess whether there are significant import threats affecting Indian auto-component industry• Assessing export opportunities for auto components through this FTA• Effect on investments due to the FTA
Findings : Imports• There is a potential manufacturing cost advantage that Thailand enjoys vis-à-vis India• Surplus capacities in Thailand – they may gain due to scale economies through exports• OEMs with bases in both India and Thailand will start sourcing specific components from there dependent on their sourcing policies and cost advantages.
Implications• There can be potential threat of building up & import surge from Thailand in automotive components• Government policy corrections / encouragement for local automotive industry required to counter the situation.
Findings : Exports• Indian automotive manufacturers have limited export opportunity to Thailand• Strong Japanese presence in automotive OEMs in Thailand – who have principally sourcing policies from Japan (strong linkage in Tier-I supplies)• Indian automotive component manufacturer have an FDI opportunity to set up manufacture of components in Thailand and exploit export opportunities to South Asia-Pacific
Implication• Indian auto-component manufacturers may find it beneficial to set-up manufacturing facility in Thailand and could also move their bases from India to Thailand.• Lower cost of manufacture in Thailand• Thailand already has global manufacturing hub for certain manufacturers – Toyota, Ford, GM, Honda etc.• Possible shift of manufacturing may happen because Indian requirement can still be met with imports from Thailand.
Business Environment India Source IFC report 2011India ranks 134th out of a list of 183 countries in ease of doing business : IFC ReportThailand ranks better – conclusion better ease will facilitate migration of investments
Thailand : better Economic Indicators Parameter Thailand India GDP 126 481 Per Capita GDP (USD) 6400 2840 Exports to GDP Ratio 64.8 13.3 Imports to GDP Ratio 57.5 13.9 Gross Domestic Savings / GDP (%) 31.1 24• The economic indicators are better than India•Significant difference of international trade (Exports / Imports) toGDP in Thailand in comparison to India