Thailand 2022 Preview

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Copyright © 2015. Thai AutoBook. All Rights Reserved.
THE THAI AUTOMOTIVE INDUSTRY 2022
Turning Insights about the Future into
Functional Consequences Today
PREVIEW
Bangkok & St.Gallen, May 2015

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Copyright © 2015 by Thai AutoBook.
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any
form or by any means, including photocopying, recording, or other electronic or mechanical
methods, without the prior written permission of the publisher, except in the case of brief
quotations embodied in critical reviews and certain other noncommercial uses permitted by
copyright law.

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The Future of the Automotive Industry in Thailand
Over the last 10 years Thailand has become the automotive hub of ASEAN – not only the ‘Detroit
of the East’, and not only the ‘Toyota City’ of South East Asia but also the production headquarter
for the Japanese manufacturers Honda, Nissan, Mitsubishi, Suzuki, Mazda and Isuzu.
Around these OEMs, Thailand has developed an infrastructure of multinational and local suppliers
that is unmatched in South East Asia.
2012 and 2013 were dubbed the ‘Golden Years’ with production of 2.5 Million units propelling
Thailand into the Top 10 of global automotive production countries.
With 2014 and 2015 we are now experiencing weaker years – by about 20% – however it is
expected that the country’s production will rebound and achieve 3 Million cars by 2017 and 4 Million
by 2020.
This expert study – Thailand Automotive 2022 - was prepared to give automotive professionals an
additional platform to discuss the future of the industry – challenges, opportunities and issue that
will shape the industry over the next 7 year cycle.
The study also includes detailed instructions for managers on how to turn the insights about the
future into consequences for their functional strategies today. These instructions are very helpful to
make practical use of the study results for your own planning as well as your communication
activities with other functions or HQs.
And in Thai-terms: It should be used in a similar way as your ‘fortune teller’ –a friend illuminating the
path that lies ahead for all of us.
I trust that it will be of significant value for your organization and invite your feedback to me
personally at uli@thaiautobook.com.
With kind regards,
Uli Kaiser
Thai AutoBook 2015

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THE THAI AUTOMOTIVE INDUSTRY IN 2022: STUDY RESULTS
The Thai Automotive Market
The Thai automotive industry, also known as the Detroit of Asia, is the nation’s success story, as it
has been a main contributor towards Thai economic development being the country’s biggest export
industry (Thai Automotive Institute, 2012 p. 2-25). In 2012, Thailand stressed its position as a big
automotive player by becoming the 7th largest car exporter globally with a total production of 2.45
million cars of which about 1 million were exported (The Economist, 2013).
Car sales growth figures of annually 13% in the Asia pacific region while there is negative growth in
North America and only 1% growth in Europe (Siam Commercial Bank, 2013) stress the importance
of the South East Asian car market in which Thailand is currently the leader. So far mostly Japanese
manufacturers have discovered Thailand as an ideal production base (Kaiser, 2013) to mostly serve
the growing ASEAN area consisting of about 600 million people (Saralertsophon 2012, p. 27).
Nevertheless, it is incontestable that it is vital for every car manufacturer to be prepared for the
future development of the Thai automotive industry since it offers a rare, yet appealing twofold
opportunity- on one side as a potential sales market and on the other side as an attractive sourcing
and production base to serve global demand (Kaiser, 2012. p. 11).
That’s exactly where the following report begins: The overall objective of this study is to provide an
industry intelligence report on how the Thai automotive industry may look like in 2022 by
conducting an online Delphi study with local industry experts followed by an in depth scenario
analysis. Thereby, it is aimed to give new insights, which, if correctly interpreted and further
developed can result in strategic advantages. The intention is to support senior executives and
corporate strategy managers who are already involved in the industry or considering entering it, in
their strategy development and decision making for the Thai automotive market.
This study is divided into three major parts:
1. Research methodology: This part includes a theoretical background on Emerging Markets
(including Thailand), Delphi study methodology, PEST framework and the scenario
development framework
2. Projections: The projections and their essence are then introduced and explained
3. Results of the Delphi study: The quantitative and qualitative results of the Delphi study
are presented in detail

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Evaluating the Future of the Thai Automotive Industry in 2022: Study
Framework
In this section, the study framework is briefly explained. It structures the focus and selection of the
projections (Exhibit 1).
Exhibit 1: Study Framework
The framework of this study is structured into three major sections. The core section is
represented by an analysis of the political, economic, social and technological/infrastructure situation
of the Thai automotive industry. The second section focuses on the analysis of the development of
the Thai automotive industry in the context of ASEAN. Finally, the third section integrates a global
perspective by considering developments outside of Asia.
The purpose of the core section is to analyze how the industry's development might look like due to
changes in Thailand's political, economic, social and technological/infrastructure environments
(Exhibit 1). With respect to politics, the question is how political developments and decisions will
affect the car industry's future. From an economic perspective, it is important to state that the focus
lays on the industries value chain and not on the macro-economic developments in Thailand. The
reason for this is that the information of most value is expected to result directly from the
investigation of each single value chain step and that information about macro-economic trends is
often already publicly available. The social dimension of the framework evaluates trends among car
buyers in Thailand as well as general trends in the Thai society relevant for the automotive industry.
Finally, the technological dimension does not focus on actual technological developments such as
new energy sources or engine concepts but is interpreted as infrastructure – ‘soft’ infrastructure
focusing on human resources, intellectual capital and innovation etc.; ‘hard’ infrastructure focusing
on energy, telecom or physical logistics infrastructure.
From a strategic perspective, it is important to not only accurately examine the trends within the
Thai automotive industry along the proposed modified PEST analysis but also to include its

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surrounding developments (Exhibit 1). In the ASEAN section, the countries Indonesia, Malaysia and
Myanmar are therefore listed because political decisions and the development of the automotive
industries in these countries are expected to affect the future of the Thai automotive industry
players in 2022. The third section, integrates other major automotive players which also influence
the Thai automotive industry who are not as closely connected as the ASEAN players (Exhibit 1).
The Study Framework Applied: Development of Projections
For the purpose of this study, projections on how the Thai automotive industry might look like in
2022 have been developed according to the study framework. These projections have then been
tested with experts from the Thai automotive industry using an online, real-time Delphi study tool.
Except for the third section, i.e. the global perspective, at least one projection was developed and
tested with the experts. Therefore, the countries and regions (Japan, China, India, Europe and USA)
in the third section are not represented through a single projection each but are incorporated into
other projections.
An extensive secondary research was conducted in order to develop the projections. This helped in
identification of the most relevant topics and issues which could be converted into projections for
the year 2022 related to the Thai automotive industry. These projections were further discussed
with local experts of Thailand's automotive industry to assess their actual relevance and identify
necessary adjustments. 20 projections about the Thai automotive industry in 2022 are presented
below. The structure is in lines of the study framework (Exhibit 1). The results for each projection
are then discussed in the next chapter.
The study framework resp. the majority of projections focuses on the core section, i.e. the modified
PEST analysis of the Thai automotive industry. The questions in Exhibit 2 were answered through
desk research and in collaboration with industry experts to develop the final projections.
In addition to the questions in Exhibit 2 to evaluate the core session, the following additional
questions were influencing the evaluation of the broader context, i.e. ASEAN and worldwide.
ASEAN, India & China Environment Projections
How do the investors perceived the following countries with respect to their attractiveness as
investment location for the global automotive industry in 2022 compared to Thailand:
• Malaysia
• Indonesia
• Myanmar
• Vietnam
• Philippines
• India
• China
Since most influences of the global environment section are already incorporated into the other
projections, only three remain for China and India. The questions of focus in this case are the
following:
China: How does the demand from China for Thai auto input look like in 2022?
India: How does the demand from India for Thai auto input look like in 2022?

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Exhibit 2: Thai Automotive Industry (PEST) Projection: Guiding Questions
Political Dimension How does the regulatory environment support / hinder the investment of
foreign auto companies in Thailand in 2022 and what are the most
important regulations for the industry itself in 2022?
Economic
Dimension
Supplier What is the level of Thai auto suppliers in 2022?
R&D
What is the R&D level in the Thai automotive industry in 2022? Where
lays the focus and what is the level of innovation?
Sourcing
What is the sourcing level in the Thai automotive industry in 2022? What
level is the quality and what are the costs?
Production
What is the production level in the Thai automotive industry in 2022?
Which standard of technology is available and what will be the output?
Marketing How does marketing work in the Thai automotive industry in 2022?
Distribution How does distribution work in the Thai automotive industry work in 2022?
Consumers What does the Thai auto buyer want in 2022?
Social Dimension
What is the value of cars for Thai society in 2022 and what are the most
important social trends affecting the industry in 2022?
Technology (Infrastructure)
Dimension
What is the level of the hard infrastructure (streets, etc.) and the level of
the soft infrastructure (blue / white collar workers) for the Thai auto
industry in 2022?

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Expert Panel (Delphi): Study Results (Selected View)
In this section, the Delphi study’s results for each projection are presented and discussed. These
results include the probability and consensus level assessments of the participating experts. The level
of consensus is especially analyzed whenever a dissent among the experts was identified.
Additionally, the most important statements of the experts are briefly summarized for each
projection.
…
Thai Automotive Hub in SEA (TEPP1) (EXAMPLE)
TEPP1: In 2022, Thailand is the largest automotive production base for passenger cars in Southeast
Asia.
The industry experts rate the average probability of the "Thai Automotive Hub in SEA" projection at
65% (Exhibit 27). It is expected that Thailand will remain the largest passenger cars production base
in South-East Asia.
Strong dissent (Exhibit 27) has been reached among the industry experts concerning this projection.
Exhibit 27: Projection: Thai Automotive Hub in SEA (TEPP1)
No Value Chain Environment Projection Probability Consensus
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In 2022, Thailand is the largest automotive production base for
passenger cars in Southeast Asia.
65% 30
Likely Strong Dissent
The consensus analysis reveals that the experts converge with their probability ratings between 80%
and 100%. However, since the expert ratings have ranged from 1% to 100% a strong dissent has
been observed (Exhibit 28).
Exhibit 28: Consensus Analysis: Thai Automotive Hub in SEA (TEPP1)

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If this projection were to come true in 2022, 50% (Exhibit 29) of the experts felt that automotive
companies in Thailand need to make minor to moderate changes in their operations today in order
to be prepared for the future and 46% of them felt that a significant change is necessary.
Exhibit 29: If projection is true in 2022, how much do Automotive companies in Thailand need to change
today`s operations to be prepared for the future?: Thai Automotive Hub in SEA (TEPP1)
Experts' comments: Thai Automotive Hub in SEA (TEPP1)
The experts cite three main reasons why Thailand will keep the position of automotive leader in
SEA till 2022 and onwards. First of all, they stress the importance of auto infrastructure, which takes
a lot of time to establish. In the case of Thailand the infrastructure is already mostly built up.
Secondly, Thailand has a very strong domestic automotive cluster that offers several advantages;
especially for the component parts industry and will therefore attract many more OEM's to localize
in Thailand and thereby increase the number of part suppliers. And thirdly, diversification is believed
to happen which will shift the low cost cars segment to Indonesia while the more profitable higher
priced cars industry will be fostered in Thailand. Indonesia is perceived as Thailand's only potential
real threat within ASEAN for the next 10 years because of growth potential resulting from their
growing domestic market and because they still have room to improve. Nevertheless most experts
consider it impossible to overtake Thailand within only 10 years.
Exhibit 30: Expert Comments: Thai Automotive Hub in SEA (TEPP1)
TEPP1: Exemplary Comments from Experts
Low Probability High Probability
• Indonesia will overtake Thailand.
• Indonesia is a threat. So is India.
• Indonesia will be about the same size in 7 to 10
years.
• Indonesia will be the largest by then.
• Malaysian and Indonesian automotive makers are
• It is already largest right now.
• Infrastructure being put in place and all major OEMs
are investing on expansions.
• Only serious competition is Indonesia which has
serious infrastructure and logistics weaknesses and
can only serve large domestic market. As logistics

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much more in engineering capability than Thais. costs continue to rise the Thai market manufacturing
for export should remain the strongest.
• Available Skilled pool and best location and also other
type of car as well Thailand will export 65-70%.
• I think it is likely that Thailand is largest automotive
manufacturer - however pickup trucks may be a
big % of that
Labour Costs (TEPP3) (EXAMPLE)
TEPP3: In 2022, labour costs for low-skilled and semi-skilled workers in the automotive industry are
much lower in Thailand than in China.
The industry experts rate the average probability of the "Labour Costs" projection at 46% (Exhibit
35). It is not expected that the low-skilled and semi-skilled labour costs in the automotive industry
will be much lower in Thailand than in China.
Strong dissent (Exhibit 35) has been reached among the industry experts concerning this projection.
Exhibit 35: Projection: Labour Costs (TEPP3)
No Value Chain Environment Projection Probability Consensus
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In 2022, labour costs for low-skilled and semi-skilled workers in
the automotive industry are much lower in Thailand than in
China.
46% 30
Unlikely Strong Dissent
Though the consensus ratings converge between 41% and 60%, we see even spread of data across
other ranges for example, between 0% and 20% and 80% to 100%, hence a strong dissent is
observed (Exhibit 36).
Exhibit 36: Consensus Analysis: Labour Costs (TEPP3)

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If this projection were to come true in 2022, 60% (Exhibit 37) of the experts felt that automotive
companies in Thailand need to make minor to moderate changes in their operations today in order
to be prepared for the future and the rest of them felt that a significant change is necessary.
Exhibit 37: If projection is true in 2022, how much do Automotive companies in Thailand need to change
today`s operations to be prepared for the future?: Labour Costs (TEPP3)
Experts' comments: Labour Costs (TEPP3)
Regarding the comparison between Thailand and China in terms of labour costs, there is not much
consensus between the experts. Some experts state that the labour costs are currently lower in
Thailand and that they will further rise in China due to high inflation and fast growth, especially in
the automotive industry. Additionally, it is believed that the introduction of the AEC will keep the
costs low in Thailand since labour migration will be simplified.
Experts on the other hand reason that China is a much bigger country with huge labour resources
whereas Thailand is reaching the maximum level of labour use/availability already, which will
automatically lead to higher labour costs. At the same time, the Thai government makes the labour
cost situation even worse by preventing migration of labour from neighbouring countries.
Additionally inflation is not only a problem in China but also in Thailand.
Exhibit 38: Expert Comments: Labour Costs (TEPP3)
TEPP3: Exemplary Comments from Experts
Low Probability High Probability
• Strong unions.
• The labour costs will rise as well significantly in
Thailand. The costs will still be lower but not much
compared to China.
• Short of worker will drive the wage (up).
• China is a big country which doesn't use all of its
labour yet, but Thailand is going to reach the
• It is already so now.
• If there's labour shortage foreign workers will be
imported & their labour rate is lower.
• China rate of pay increase is higher than Thailand
• They are lower now and costs in China will rise
stronger than Thai cost.
• Labour cost in China is increasing rapidly due to high

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maximum level of labour use already.
• Thailand does everything to impede migration of
labour from neighbouring countries while at the same
time forcing increases in labour cost.
• Costs are continuing to increase in Thailand, inflation
will hinder the industry.
inflation and fast growth in the automotive industry. It
will pass Thailand very soon.
• Could come down from AEC.
…
INSTITUTIONS-RESOURCES MATRIX (I-RM)
This PRIMER in APPLYING the INSTITUTIONS-RESOURCES MATRIX (I-RM) provides managers
and consultants as well as students with an introduction into “how to apply the I-RM” when
developing or assessing a strategy. In short, we believe that the I-RM as a framework fills a gap that
supports practitioners to systematically turn insights about the future institutional environment1 of a
company (i.e. the competitive environment) into consequences on the corporate/business unit but
especially the functional level2 (i.e. the resources/capabilities of functions such as marketing,
production or procurement). The I-RM is part of the of strategy formula3 concept based on resp.
inspired by McKinsey’s 10 Strategy Tests (Appendix). The strategy formula allows students to better
understand what matters for superior strategies (i.e. the creation of competitive advantages) and
how the three major elements of strategic management (i.e. strategic analysis, strategy development
and strategy implementation) complement each other. Within the strategy formula resp. McKinsey’s
10 Strategy Tests the I-RM basically represents a tool to process insights about future developments
within a company as required in the tests #3 to #5.
For a more detailed overview on the strategy formula and its different components, please refer to
the PRIMER in STRATEGIC MANAGEMENT available upon request from Prof. Dr. Roger Moser.
STRATEGIC ANALYSIS: TURNING FUTURE INSIGHTS INTO
FUNCTIONAL CONSEQUENCES TODAY
Creating an accurate picture of the future is essential for executives to improve their decision
making in general and their strategies in particular. About 50% of the challenges that executives face
include a structured analysis of more than one alternative that needs to be considered (Exhibit 83).
However, many companies do not have well-structured processes in their companies that enable an
appropriate information management during rising complexity resp. information requirements.
1
The institutional environment is broadly understood as all major “forces” that can influence the competitive environment of a company.
This includes all aspects that belong to the PESTEL environment – the political, macro-economic, social and technological, ecological or
legal environment – or the value chain activities of competitors – the sourcing, R&D, HR, finance, manufacturing, marketing, sales or
after-sales activities etc. of competitors – or the behaviour of other important stakeholders such as customers, suppliers or NGOs.
2
The I-RM focuses in its application primarily on the identification of potential consequences of future developments in the institutional
environment on the functional strategies of a company. However, in order to identify consequences on a functional level.
3
The strategy formula has been developed by Prof. Dr. Roger Moser, Assistant-Professor of International Management at the University of
St.Gallen, for the Competitive & Corporate Strategies course in the MBA program of the University of St.Gallen. The strategy formula
structures McKinsey’s 10 Strategy Tests in a different way to better highlight the interdependence between the different strategy tests.

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The information management capabilities of companies can be separated into information gathering
and information processing activities (Exhibit 84). Information gathering can either happen through
advanced BIG Data analyses (e.g. advanced analytics) or through smart SMALL Data collection
approaches (e.g. expert-panels). While there are many external service providers to help with big or
small data collection efforts, companies also need structured approaches that support their
information processing efforts. The “Institutions-Resources-Matrix” supports executives to transfer
their insights about future developments in the institutional environment into functional
consequences for their companies.
Exhibit 83: Four Levels of Uncertainty
Source: Courtney et al.: Strategy Under Uncertainty, Harvard Business Review (5), 1997.
Exhibit 84: Information Gathering & Processing (Organizational Information Processing Theory)
Source: Moser, MBA-HSG, 2013.
In short, the organizational information processing theory (OIPT) claims that companies need to
adapt their information management capacities (e.g. processes, structures, systems) to the
information requirements a company faces. For example, a company operating in the Swiss fresh

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food retail sector faces a different information requirement challenge (i.e. magnitude of uncertainty and
ambiguity in the institutional environment of the company) than if it would operate in the Indian
retail market. Accordingly, the company needs to have different information management capacities
(i.e. industry intelligence gathering and processing). Theoretical considerations and an empirical
study4 confirm that a fit between the level of information requirements and the level of information
management capacities actually leads to superior strategies which finally positively influence a
company’s performance. Although the strategy test (i.e. Test #4 – Does your strategy rest on privileged
insights?) among McKinsey’s 10 Strategy Tests that was neglected most among more than 2000
executives around the globe focuses directly on the value of insights into the institutional
environment that (almost) nobody else has. It is not the only decisive element when trying to create
competitive advantages.5 Therefore, companies do not per se have to invest into their own
intelligence gathering efforts although privileged insights (i.e. Test #4) along with having an in-depth
understanding of trends (i.e. Test #3) and proactively embracing uncertainty (i.e. Test #5) are often
useful to identify future opportunities and create competitive advantages.
Instead, it matters as much for the creation of competitive advantages that companies have
intelligence processing processes and structures that actually allow the relevant decision makers (not
only at the top) to access, discuss, interpret and finally base their decisions upon. Especially any kind
of report about long-term future developments in the less-industry specific institutional environment
(e.g. trends in the society, general technological advancements, major changes of policies in
governments etc.) are often not easy to transform into consequences for a company that go beyond
basic analyses at the corporate or BU level. However, most strategies are finally implemented (i.e.
turned into action) on the functional level. This means that there is only a little value for a company
as such if (non-) privileged insights about the future institutional environment are not only analyzed
and discussed but have a real impact on the resource (re-) allocation (e.g. budgets, time/attention of
executives, capabilities of employees) in all affected functions.
The Institutions-Resources Matrix (I-RM) focuses specifically on the structuring of insights about the
future and their transformation into consequences for companies – not only on the corporate or
business unit level but even the functional level where most strategies are finally implemented
(Exhibit 85).
4
Kuklinski, Moser and Callarman have empirically confirmed in a study the existence of ideal profiles of information management
capacities (i.e. different intelligence gathering and processing activities) for different information requirement levels (i.e. different levels of
uncertainty and ambiguity ) in the context of foreign Strategic Business Units in China. The transfer of these insights into other contexts
seems at least reasonable. The conference paper of Kuklisnki et al. about the study won one of five best paper awards of the European
Decision Sciences Conference in 2013.
5
Bradley et al., McKinsey Quarterly, 2011 talk about an Insight Deficit in many companies as more than 50% of the more than 2000
executives in study confirmed that they do not specifically invest in intelligence gathering activities that create insights that other
companies do not have access to.

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Exhibit 85: The Institutions-Resources Matrix (I-RM)
Source: Moser, MBA-HSG, 2013.
In fact, the I-RM is basically a tool for any interested party to turn rather long-term future insights into
functional consequences today resp. tomorrow. In short, the I-RM involves three major steps.
First, step Ia requires to choose a specific scenario or single projection about the future
developments in the institutional environment and identify in step Ib the implications of this specific
scenario or single projection on the focal company’s corporate resp. BU strategy.6
Next, step 2a requires choosing a specific functional focus7 for the company resp. the BU as well as
identifying those elements of the corporate resp. BU strategy that matter for the chosen functional
focus. Step 2b then transforms the implications of the corporate resp. BU strategy identified as
relevant for the functional strategy (i.e. insights from step 1b) into consequences for the specific
resources of the chosen function. The I-RM includes the following resources in its basic model
although executives can add or replace or even delete the suggested resource categories8 according
to their specific needs:
Ø Physical Resources
Ø Human Resources
6
In general we speak in this context about the corporate strategy of a company if the company has only a limited market/activity focus
that is integrated into a single organizational unit (i.e. business unit strategies). If a company comprises of several BUs (business units) it
is recommended to analyse the implications for each BU separately.
7
The most appropriate functional focus depends on the organizational structure of the company as well as the background resp.
objectives of the executives applying the I-RM. In most cases it makes sense to focus on the critical sets of activities that are most
important for the strategy implementation of a company. Besides the primary value chain activities such as logistics/distribution, R&D,
production/operations or marketing/sales it also makes to run separate analyses for the HR or IT function.
8
The five resource categories have been selected as the basic model because they represent a set of resources that virtually and function
in a company has to rely on in one way or another. For example, even the human resources department of a company needs some
office space (i.e. physical resources), the production/operations function requires the adaption of the skills of its blue-collar workers (i.e.
human resources) over time, and even the marketing function has to integrate new technologies such as analytics and social media into its
strategy implementation activities. Moreover, all functions need to adapt their organizational resources to the developments in the
institutional environment. For example, the integration of TV, internet access the provision of games as a technological trend requires
many R&D departments to reorganize their organizational resources to make sure they are close to the consumer market as well as
new display technologies at the same time. Finally, relational resources are especially important when the company looks into institutional
environments where it has traditionally not been active or when a company has several BUs that do not share many functional activities.

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Ø Technological Resources
Ø Organizational Resources
Ø Relational Resources
Finally, the optional step 3 allows executives to assess the potential financial consequences of any
identified implication for a function and thus provide a first outlook on future budgets of the focal
function.
In practice, executives have to repeat especially step 1a/b and step 2a/b for any chosen function for
all selected specific scenarios resp. single projections that potentially have a strong impact on the
company resp. the function and their set of activities. If such an analysis is done for a single function
across major future developments that matter for the company, executives often realize that some
consequences for the resources of a function have been repeatedly identified across various
scenarios or projections. These consequences are often the most interesting ones as they matter
across different scenarios and/or single projections. It is especially these consequences where
executives want to spend some more time to assess what this means for the future budget of the
function and other aspects of strategy implementation including communication, motivation,
qualification and organization.
…

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