A cursory study of India-thailand FTA and impacts

1. FTA with Thailand : Indian Auto
Component Industry Perspective
Pallav Vikash Chatterjee

2. 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

3. 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.

4. 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.

5. 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

6. 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.

7. Thailand Advantage
• Better economic environment (investor
friendly policies)
• Manufacturing cost advantage
• Thai market structure

8. Business Environment India
Source IFC report 2011
India ranks 134th out of a list of 183 countries in ease of doing business : IFC Report
Thailand ranks better – conclusion better ease will facilitate migration of investments

9. 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) to
GDP in Thailand in comparison to India

10. Investment Policies of Thailand

11. Country Advantage
Parameter Units Thailand India
Petrol ($/Liter) 0.42 0.7
Fuel Diesel ($/Liter) 0.34 0.43
Kerosene ($/Liter) 0.39 0.13
Power cents / KWH 8.1 13.4
Interest Rate (%) 6.0 9.0
Insurance Costs (%) 0.15 0.25
Plant Manager ($) 1600 1100-1300
Labour Costs Engineer ($) 600 550
Worker ($) 150-200 200
Source: www.ibef.org