Thailand has been a stronghold for automobile manufacturing for decades. It nicknamed itself “the Detroit of Asia,” and the moniker stuck, with good reason. It’s currently the 12th most industrious auto manufacturer in the world, and the largest in Southeast Asia.
Japanese makers like Toyota and Mitsubishi have had operations in Thailand since the 1960s. GM, Ford, Mercedes and BMW all followed. A GM spokesperson said that its plant is a major manufacturing hub for the Asia-Pacific region and Africa, and its vehicles are exported to 15 markets, including Australia and New Zealand.
Thailand become an automaking
For three decades, Thailand has imposed an 80% import tariff on cars and 60% on motorcycles, to keep manufacturing within the country. The government offers land ownership rights for foreign investors and smooth visa and permit processes for foreign auto advisers.
Meanwhile, Thailand’s government introduced various tax incentives favorable to foreign investors. Companies relocating to Thailand are exempt from corporate income tax for eight years. In some areas of the country, such as automaking hub Rayong, where GM and Ford are based, Thailand reduced corporate tax rates by up to 50%.
Thailand is also well located geographically with convenient ports and airports, allowing exporting ease. Unlike in Indonesia and other competing markets, most auto parts are made and sourced internally — with around 1,500 suppliers in Thailand today — so there’s little need to import them. And a free trade agreement with the nine other countries of the Association of Southeast Asian Nations is another bonus: Automakers in Thailand pay zero or highly reduced tariffs for exporting autos within the region.
Labor is cheaper than in developed nations and China, though not as cheap as in surrounding Southeast Asian nations. But the fact that the labor force has amassed skill and experience is critical.
“This has helped to retain investment in the face of competition from markets such as Vietnam or Indonesia that offer lowered labor costs,” said Maxfield Brown, manager of the Business Intelligence Unit at Dezan Shira & Associates.
