Thailand lures Indian auto companies with tax sops

Access to the lucrative South-East Asian market and the low cost of importing products back home are amongst the key reasons which are attracting Indian auto players to set shop in Thailand. Thailand is among the ten countries of the ASEAN Free Trade Area (AFTA). AFTA has eliminated many trade tariffs among its member nations to help boost investments. The free trade zone has created a strong auto market in Malaysia, Singapore, Indonesia and Vietnam, among others. Access to Thailand means access to South-East Asia.

India also has a free trade agreement with Thailand the cost of moving goods between the two countries is minimal.

These advantages have made India's largest vehicle maker, Tata Motors, to forge a joint venture with Thonburi, a local auto player in Thailand, to make pick-up trucks. The same trucks are imported to India and is likely to attract zero duty, starting 2010.

The JV will make about 12,000 units starting this month, which will be gradually ramped up to 30,000 units in 2009. Through the 70:30 JV, Tata Motors is targeting the 4.5 lakh strong Thailand pick-up market, which is

also the second largest pick-up market in the world after the US.

An analyst from the industry said, "The FTA provides an opportunity for Indian companies to set up base in Thailand and supply back home. It could reduce the end price of components."

According to industry sources, country's second largest bus maker, Ashok Leyland is also looking to have business activities in that country. The company, will also take advantage of the FTA with a subsequent introduction of buses in that region through a tie-up with a local player. As of now, the company is largely restricted to the Indian shores.

Meanwhile, Mahindra and Mahindra (M&M), which is not present in the South-Eastern country, may venture with their SUV, pick-up trucks and tractors. The company recently expressed its idea of enhancing its presence globally through phased launches in different countries.

Pravin Shah, VP, international operation, M&M, said, "Since Thailand is the world's largest pick-up market, we cannot be ignoring it for long. We will consider our SUV's and pick-up for that market. We will also stand to take the advantage of the FTA."

Ford India, a subsidiary of Ford Motor Company, US, on the other hand, is importing completely knocked down (CKD) kits of the Endeavour sport utility vehicle from its manufacturing base in Thailand.

Almost 2,000 CKD kits were imported in the country last year, up from 1800 units in the previous year.

These kits are assembled at its India plant in Chennai.

Apart from this, the company also imports auto parts from Thailand and similarly exports auto parts of Indian manufacturers to that country. Bajaj Auto, India's second largest two wheeler maker, is looking to have a presence in the high volume two-wheeler region of the South-East Asia. The company is already working on a manufacturing base in neighbouring

Indonesia for a two-wheeler facility. Subsequently, the company can also venture into Thailand.

Ravi Kumar, vice president-business development, Bajaj Auto, said, ''The AFTA agreement will help us move products among the member nations freely.''