Summary
Nowadays, aluminum alloy wheels have become popular in the car accessories market. They are being used as substitute for steel wheels. Made of aluminium, these aluminum alloy wheels have light weight and provide good heat ventilation. They are used not only as car accessories, but also for driving safety. At present, there are about 20 aluminum alloy wheels manufacturers in Thailand. However, there are only a few large ones and mostly are international joint ventures. This is because this industry requires a high level of technology and a large amount of capital and machinery investment. Over 70% of the output is for domestic consumption in the car manufacturing factories market and the spare parts market.
The sale volume in the country during 1997-1998 dramatically declined by 25 and 61% respectively as a result of the severe economic crisis. With a lower purchasing power, consumers had to shift their consumption habits to necessary goods. However, parent companies have changed the strategy by expanding the exporting markets and also finding new markets to boost the sale volume. At the same time, they have shifted the production base to Thailand which has resulted in a higher average production rate this year (1999) than that of last year. With such shift of production, international joint ventures reported an overstated export volume of more than 60% of real production. The demand of aluminum alloy wheels in 1998 increased by 6% up to 1.444 million wheels after the decline of 16% in 1997. With the recovery of the Thai economy in 1999, the sale volume of cars during the first 9 months increased by 30% over the number of the same period in the previous year. The production volume of cars also increased by more than 100%. With the policy of exporting, the international joint ventures created the domestic demand of aluminum alloy wheels in 1999 to increase by 14% over the last year or reached the volume of 1.652 million wheels. It is forecast that the aluminum alloy wheels market in the year 2000 will continue to rise due to the economic recovery and the increasing purchasing power.
The initial investment of aluminum alloy wheels factory with the production capacity of 200,000 wheels per year is approximately 200 million baht. It is classified into 166 million baht for machinery and 20 million baht for current capital. The production cost is divided into 52% for raw materials, 42% for factory overhead and depreciation expenses, and 5% for labor cost. The return is approximately 8% of sale volume.
Marketing
Demand: Present and Future
Aluminum alloy wheels, or more well-known name of "Max wheel" among Thais, are car accessories which have become very popular in the market. They are used as an substitute for steel wheels. They have not only varieties of attractive designs and sizes, but also light weight and good heat ventilation. Moreover, the tire's width of aluminum alloy wheel is larger than that of steel. Therefore, it provides higher driving safety standard.
More than 70% of aluminum alloy wheels in Thailand is for domestic consumption and can be classified into 2 major types according to the demand. They are 1) car manufacturing and assembling factories--the demand depends on the production volume of cars that have aluminum alloy wheels as standard accessories. With a strong competition in the car market, the volume of cars with aluminum alloy wheels as standard accessories has increased because they are more attractive to some customers. 2) Spare parts market--the target customers are the ones who have bought the cars which are not installed with aluminum alloy wheels. They change the original wheels to aluminum alloy ones at local dealers. There are varieties of aluminum alloy wheels, both locally made and imported, available in the market for them to choose from.
Export--Due to the demand of international standard products which requires a high level of technology and the suppliers in the world market who possess such high standard of production skills, only a few Thai manufacturers can compete in the exporting market. Apart from domestic consumption, most production output is being exported to parent companies and/or to the markets provided by those parent companies. The main buyers are Japan and the United States.
Import--Since July 1997, with the depreciation of baht and the severe recession of Thai economy accompanied by a high customs duty of 42% of import price, aluminum alloy wheels have been less popular in the Thai market. The imported aluminum alloy wheels are almost 100% more expensive than the locally made ones.
Aluminum alloy wheels market reached the highest average growth rate of 11% during the years 1990-1995. With such high market growth rate, the demand for cars increased more than 15% per year. At the same time, the production base was shifted to Thailand by foreign investors i.e. from Japan and Europe. As a result, a part of aluminum alloy wheels production was supplied to car manufacturing factories as standard car accessories. However, the economic crisis caused the domestic aluminum alloy wheels market in 1996 to expand at a slower rate and finally face a severe recession in 1997-1998. The consumers had lower purchasing power and changed their consumption to more necessary products. The record of car sale volume, which is considered as a luxury good, showed that the number decreased by 38% to 347,002 cars from 1996 to 1997 and another 59% decrease to 141,527 cars in 1998. With such situation, the demand for aluminum alloy wheels also significantly decreased. In 1997, the number showed a demand of 1.365 million wheels which was a 16% decrease. However, in 1998 the manufacturers, especially international joint ventures, changed their strategy to emphasize on exporting to other countries provided by their parent companies. At the same time, those parent companies shifted a part of their production to Thailand because of a cheaper production cost in the country. Therefore, the production volume for foreign demand increased. The demand for aluminum alloy wheels in 1998 was 1.444 million wheels or a 6% increase.
It was forecast that the demand for aluminum alloy wheels in 1999 would increase from 1998 by 14% to 1.652 million wheels due to the following supporting factors: 1) The car production and sale volume in the country for the first 9 months of 1999 were at 50,284 cars (more than 100% increase) and 43,437 cars (33% increase) respectively. With the recovery of the Thai economy, it was expected that the car production and sale volume in the year 1999 would increase by 74% and 31% or to 275,000 cars and 185,500 cars respectively. Therefore, the demand for aluminum alloy wheels in car manufacturing factories and assembly plants would increase by 65% over the previous year; 2) the strategy of exporting of those international joint ventures' parent companies would make the export volume in 1999 to increase, compared to the 1998 figures. From the survey of 4 international joint ventures, the sale volume in the first 6 months of 1999 increased more than 20% over the same period in 1998. However, it was expected that the demand in spare parts market would still be quite low. That was because most consumers were not confident in the recovery of the Thai economy and they had to be careful with their expenditures. In addition, from the survey of distributors of aluminum alloy wheels in the spare parts market, it showed that during the first half of 1999, some consumers have pledged their aluminum alloy wheels for loans from them. However, the number was not as high as in the previous year.
In the year 2000, it is expected that with the economic recovery, the production volume of cars will increase which would result in a higher domestic demand for aluminum alloy wheels, both in the cars manufacturing market and the spare parts market. Moreover, the volume in the export market will continue to increase as a result of the improved economic condition of partner countries compared to the past 1-2 years.
Present Manufacturers
At present, there are 20 aluminum alloy wheels manufacturers in the market with the total production volume of 3.273 million wheels per year. Seven of those 20 manufacturers have received a promotion support from the Office of the Board of Investment (BOI) (not include the 2 manufacturers waiting for approval)
List of Major Aluminum Alloy Wheel Manufacturers
International Joint Ventures1/ Registered Capital (baht)
Enkei Thai Co., Ltd. 133,600,600
Siam Lemmeyz Lemmerf Co., Ltd. 108,000,000
Asahi Somboon Aluminium Co., Ltd. 310,000,000
Yachiyoda Alloy Wheel Co., Ltd. 40,000,000
Local Company
Ferstar (Thailand) Co., Ltd. 294,316,000
Mass Alloy Wheel (Thailand) Co., Ltd. 144,450,000
JRD (Thailand) Co., Ltd. 32,140,000
Subphaisai Industry Co., Ltd. 20,575,000
Top Wheel Co., Ltd. 16,500,000
Citicorp Alloys Co., Ltd. 5,500,000
Source: Department of Industrial Works.
Note: 1/produce for both domestic and foreign markets.
Distribution Channels
The distribution channels can be classified, according to the target groups, into 2 main markets which are 1) domestic and foreign car manufacturers market : the manufacturers will directly contact their customers and deliver products according to orders; 2) spare parts market: will mainly distribute products through distributors in order to cover all regions.
Production
Raw Materials and Sources
The raw material for producing aluminum alloy wheels is aluminium alloy ingot which is a metallic bullion. But since there is no bauxite, which is for being smelted into aluminium, in Thailand, the aluminium alloy ingot which is used in the country are all imported. The major sources are from the United Arab Emirates, Australia, Russia, and Bahrain. However, the manufacturers can purchase aluminium alloy ingot from local distributors, i.e. Nikei Thai Aluminium Co., Ltd., Sophonpan Co., Ltd., and Akephol Aluminium Co., Ltd.
Cost Structure of Aluminum Alloy Wheel Industry
Category Percentage
1. Raw Materials 52
- Imported Raw Materials 100
2. Wages 5
3. Depreciation and Others 43
Total 100
Source: Interview manufacturers
Production Process
The production of aluminum alloy wheels can be conducted in 3 different ways
1. Low pressure-- drawing the melting alloy into a vacuumed mold
2. High pressure--injecting the melting alloy into a mold
3. Gravity die casting--it is the most popular process in Thailand. It is a process of pouring melting alloy into a mold, casting and cutting, heat treatment, CNC machining, hole machining according to each order/model, and painting. There is an inspection at each step. The manufacturer has to use the centrifugal force procedure in this production process, so that the molecule of the alloy will be firmly attached for strength and durability.
Gravity Die Casting Production Process
Aluminium Ingot Melting
Casting & Cutting
|
v
Heat Treatment
|
V
CNC Machining
|
V
Value & PCD Hole Maching
|
V
Air Leak Testing
|
v
Painting
|
V
Final Inspecting
Source: Interview manufacturers
Machines for Production
With five steps of the production process: Melting, casting, plating/oven-heating, lathing, and painting, a large amount of investment is required, especially for the machines and equipment for casting and lathing processes. Therefore, the manufacturers prefer to import final products from other countries and/or through local distributors. For the melting and plating/oven-heating processes, there are manufacturing factories in Thailand which can produce and install the machines according to the customers' specifications, i.e. KoYo Manufacturing (Thailand) Co., Ltd. However, from the survey of some international joint ventures, the machines being used in the production process are imported with the provision from parent companies. For example, Enkei Thai Co., Ltd, the largest aluminum alloy wheels manufacturer in Thailand, imports all machines and equipment from Enkei Engineering Co., Ltd. in Japan.
Investment and Finance
The investment in aluminum alloy wheel industry, especially for those manufacturers who export their products to other car assembly plants, requires the location of factory to be near the target customers. The convenient ground and water transportation is important. Due to the perimeter of 13-17 inches and the weight of 2.2-2.8 kg of each alloy wheel, the quantity of alloy wheels transported at each time is limited, which results in a higher cost. Based on the scenario of production volume of 200,000 wheels per year and 20 working hours per day, the investment and equipment required are as followed:
Initial Investment
1. Registered Capital and Initial Investment 200 million baht
- Land and Building 20 million baht
- Machinery and Equipment 166 million baht
- Vehicle and Others 14 million baht
2. Working Capital 20 million baht/year
Personnel
Aluminum Alloy Wheel Industry requires 90 employees as follow:
1. Employees in the Factory
1.1 Workers 58 person
1.2 Machanics 15 person
- Engineers 5 person
- Supervisors/Experts 2 person
2. Office Staff and Administration Staff
2.1 Accounting and Financing 2 person
2.2 Marketing 3 person
2.3 Buyer 1 person
3. Executive Staffs 4 person
Annual Expenses
1. Cost of Production
1.1 Cost of Raw Materials
- Aluminum Alloy Ingot 85,000,000 baht/year
1.2 Wages 20,000,000 baht/year
1.3 Cost of Depreciation 16,000,000 baht/year
1.4 Overhead Costs 29,000,000 baht/year
Total Cost of Production 150,000,000 baht/year
2. Cost of Sales and Administration
2.1 Salaries 6,000,000 baht/year
2.2 Utilities
- Telephone Cost Telegram Postage 500,000 baht/year
2.3 Transport Cost
- Vehicle 700,000 baht/year
- Transport Cost/ Export Expenses 1,500,000 baht/year
2.4 Miscellaneous Expenses 3,300,000 baht/year
Total Cost of Sales and Administration 12,000,000 baht/year
3. Interest Expenses 4,000,000 baht/year
The average profit is approximately 8% of total sales.
Note: The average sales turnover stood at 160,000 wheels p.a., the average price per unit was 1,130 baht, and the annual earnings totalled 180.80 million baht.
Appendix
Table 1: Exports of Aluminum Alloy Wheels in 1995-19991
Year Quantity % Change Value % Change
(kilograms) (million baht)
1995 2,066,156 52.87 302.37 82.47
1996 2,109,154 2.08 277.70 -8.16
1997 5,031,752 138.57 737.87 165.71
1998 11,284,311 124.26 1,766.45 139.40
1999 (Jan-Jun) 7,566,464 69.35 1,015.04 29.63
Source: The Customs Department
Note: Customs tariff H.S. code 8708.700-004 comprises wheels and parts and accessories of all vehicles, including tractors. However, more than 80% of exports of this customs code were aluminum alloy wheels. Each wheel weighs about 2.2-2.8 kilograms.
Table 2: Major Export Markets in the First Half of 1999
Country Percentage
1. Japan 33.33
2. United States 22.16
3. Belgium 16.95
4. Australia 4.86
5. Switzerland 3.97
6. Others 18.77
Total 100.00
Source: The Customs Department, calculated by SCB Research Institute
Table 3: Imports of Aluminum Alloy Wheel in 1995-1999
Year Quantity % Change Value % Change
(kilograms) (million baht)
1995 2,545,583 32.93 184.71 -5.95
1996 20,092,698 689.32 144.00 -22.04
1997 2,064,749 -89.72 84.20 -41.53
1998 589,031 -71.47 44.33 -47.36
1999 (Jan-Jun) 649,653 111.66 26.08 15.05
Source: The Customs Department
Note: Customs tariff H.S. code 8708.700-004 comprises wheels and parts and accessories of all vehicles, including tractors. However, more than 50% of imports of this customs code were wheels and parts and accessories for use with tractors.
Table 4: Major Import Markets in the First Half of 1999
Country Percentage
1. Japan 55.47
2. United States 18.41
3. Germany 8.13
4. Italy 4.05
5. Taiwan 3.24
6. Others 10.70
Total 100.00
Source: The Customs Department, calculated by SCB Research Institute
Rules and Regulations
1. Imports and Exports: Subject to the customs inspection procedures of the Customs Department.
2. Tariff: The import of aluminium ingot, harmonized code 7601-100-906 untainted aluminum and harmonized code 7601-200-908 tainted aluminum, is subject to a customs duty of 1% of import price, effective on January 1, 1999
3. Permit for Plant Establishment
4. Investment Promotion Support: All interested parties can obtain investment promotion support. Documents and application form (Kor Kor Tor 01) are available at Investment Service Center, the Office of the Board of Investment: Head Office: Bangkok, Viphavadee Rangsit Road, Jatujak, Tel. (662) 537-8111-55 and Regional offices: Northern region (Chiengmai) Tel. (053) 203-397- 400, Eastern region (Chonburi) Tel. (038) 491-820, Northeastern region (Nakornrajseema) Tel. (044) 213-184, Southern region 1 (Songkla) Tel. (074) 347-161-5, and Southern region 2 (Surajthani) Tel. (077) 213-698-9.
5. Application for Standard Quality System: In addition to the ISO 9001, a well- known product quality standard in the exporting industry, QS 9000 is also the management system standard for cars manufacturing and assembling factories. It is acceptable worldwide with the initiation of setting up the criteria for their parts manufacturers by major car manufacturers, Ford General Motors and Chrysler, in the United States. There are over 300 strict criteria for QS 9000 which also cover all those under ISO 9001. These criteria are accepted worldwide and will be used as a replacement of follow-up inspection which is directly conducted by customers. Therefore, it is mandatory for Thai alloy wheels manufacturers to receive the ISO 9001 and QS 9000 if they want to be competitive in the world market. Moreover, there are also other standards in the aluminum alloy wheels industry in Thailand, for example, JWL of Japan, VIA of Japan, and TUF of Europe.
--Department of Industrial Promotion--
Nowadays, aluminum alloy wheels have become popular in the car accessories market. They are being used as substitute for steel wheels. Made of aluminium, these aluminum alloy wheels have light weight and provide good heat ventilation. They are used not only as car accessories, but also for driving safety. At present, there are about 20 aluminum alloy wheels manufacturers in Thailand. However, there are only a few large ones and mostly are international joint ventures. This is because this industry requires a high level of technology and a large amount of capital and machinery investment. Over 70% of the output is for domestic consumption in the car manufacturing factories market and the spare parts market.
The sale volume in the country during 1997-1998 dramatically declined by 25 and 61% respectively as a result of the severe economic crisis. With a lower purchasing power, consumers had to shift their consumption habits to necessary goods. However, parent companies have changed the strategy by expanding the exporting markets and also finding new markets to boost the sale volume. At the same time, they have shifted the production base to Thailand which has resulted in a higher average production rate this year (1999) than that of last year. With such shift of production, international joint ventures reported an overstated export volume of more than 60% of real production. The demand of aluminum alloy wheels in 1998 increased by 6% up to 1.444 million wheels after the decline of 16% in 1997. With the recovery of the Thai economy in 1999, the sale volume of cars during the first 9 months increased by 30% over the number of the same period in the previous year. The production volume of cars also increased by more than 100%. With the policy of exporting, the international joint ventures created the domestic demand of aluminum alloy wheels in 1999 to increase by 14% over the last year or reached the volume of 1.652 million wheels. It is forecast that the aluminum alloy wheels market in the year 2000 will continue to rise due to the economic recovery and the increasing purchasing power.
The initial investment of aluminum alloy wheels factory with the production capacity of 200,000 wheels per year is approximately 200 million baht. It is classified into 166 million baht for machinery and 20 million baht for current capital. The production cost is divided into 52% for raw materials, 42% for factory overhead and depreciation expenses, and 5% for labor cost. The return is approximately 8% of sale volume.
Marketing
Demand: Present and Future
Aluminum alloy wheels, or more well-known name of "Max wheel" among Thais, are car accessories which have become very popular in the market. They are used as an substitute for steel wheels. They have not only varieties of attractive designs and sizes, but also light weight and good heat ventilation. Moreover, the tire's width of aluminum alloy wheel is larger than that of steel. Therefore, it provides higher driving safety standard.
More than 70% of aluminum alloy wheels in Thailand is for domestic consumption and can be classified into 2 major types according to the demand. They are 1) car manufacturing and assembling factories--the demand depends on the production volume of cars that have aluminum alloy wheels as standard accessories. With a strong competition in the car market, the volume of cars with aluminum alloy wheels as standard accessories has increased because they are more attractive to some customers. 2) Spare parts market--the target customers are the ones who have bought the cars which are not installed with aluminum alloy wheels. They change the original wheels to aluminum alloy ones at local dealers. There are varieties of aluminum alloy wheels, both locally made and imported, available in the market for them to choose from.
Export--Due to the demand of international standard products which requires a high level of technology and the suppliers in the world market who possess such high standard of production skills, only a few Thai manufacturers can compete in the exporting market. Apart from domestic consumption, most production output is being exported to parent companies and/or to the markets provided by those parent companies. The main buyers are Japan and the United States.
Import--Since July 1997, with the depreciation of baht and the severe recession of Thai economy accompanied by a high customs duty of 42% of import price, aluminum alloy wheels have been less popular in the Thai market. The imported aluminum alloy wheels are almost 100% more expensive than the locally made ones.
Aluminum alloy wheels market reached the highest average growth rate of 11% during the years 1990-1995. With such high market growth rate, the demand for cars increased more than 15% per year. At the same time, the production base was shifted to Thailand by foreign investors i.e. from Japan and Europe. As a result, a part of aluminum alloy wheels production was supplied to car manufacturing factories as standard car accessories. However, the economic crisis caused the domestic aluminum alloy wheels market in 1996 to expand at a slower rate and finally face a severe recession in 1997-1998. The consumers had lower purchasing power and changed their consumption to more necessary products. The record of car sale volume, which is considered as a luxury good, showed that the number decreased by 38% to 347,002 cars from 1996 to 1997 and another 59% decrease to 141,527 cars in 1998. With such situation, the demand for aluminum alloy wheels also significantly decreased. In 1997, the number showed a demand of 1.365 million wheels which was a 16% decrease. However, in 1998 the manufacturers, especially international joint ventures, changed their strategy to emphasize on exporting to other countries provided by their parent companies. At the same time, those parent companies shifted a part of their production to Thailand because of a cheaper production cost in the country. Therefore, the production volume for foreign demand increased. The demand for aluminum alloy wheels in 1998 was 1.444 million wheels or a 6% increase.
It was forecast that the demand for aluminum alloy wheels in 1999 would increase from 1998 by 14% to 1.652 million wheels due to the following supporting factors: 1) The car production and sale volume in the country for the first 9 months of 1999 were at 50,284 cars (more than 100% increase) and 43,437 cars (33% increase) respectively. With the recovery of the Thai economy, it was expected that the car production and sale volume in the year 1999 would increase by 74% and 31% or to 275,000 cars and 185,500 cars respectively. Therefore, the demand for aluminum alloy wheels in car manufacturing factories and assembly plants would increase by 65% over the previous year; 2) the strategy of exporting of those international joint ventures' parent companies would make the export volume in 1999 to increase, compared to the 1998 figures. From the survey of 4 international joint ventures, the sale volume in the first 6 months of 1999 increased more than 20% over the same period in 1998. However, it was expected that the demand in spare parts market would still be quite low. That was because most consumers were not confident in the recovery of the Thai economy and they had to be careful with their expenditures. In addition, from the survey of distributors of aluminum alloy wheels in the spare parts market, it showed that during the first half of 1999, some consumers have pledged their aluminum alloy wheels for loans from them. However, the number was not as high as in the previous year.
In the year 2000, it is expected that with the economic recovery, the production volume of cars will increase which would result in a higher domestic demand for aluminum alloy wheels, both in the cars manufacturing market and the spare parts market. Moreover, the volume in the export market will continue to increase as a result of the improved economic condition of partner countries compared to the past 1-2 years.
Present Manufacturers
At present, there are 20 aluminum alloy wheels manufacturers in the market with the total production volume of 3.273 million wheels per year. Seven of those 20 manufacturers have received a promotion support from the Office of the Board of Investment (BOI) (not include the 2 manufacturers waiting for approval)
List of Major Aluminum Alloy Wheel Manufacturers
International Joint Ventures1/ Registered Capital (baht)
Enkei Thai Co., Ltd. 133,600,600
Siam Lemmeyz Lemmerf Co., Ltd. 108,000,000
Asahi Somboon Aluminium Co., Ltd. 310,000,000
Yachiyoda Alloy Wheel Co., Ltd. 40,000,000
Local Company
Ferstar (Thailand) Co., Ltd. 294,316,000
Mass Alloy Wheel (Thailand) Co., Ltd. 144,450,000
JRD (Thailand) Co., Ltd. 32,140,000
Subphaisai Industry Co., Ltd. 20,575,000
Top Wheel Co., Ltd. 16,500,000
Citicorp Alloys Co., Ltd. 5,500,000
Source: Department of Industrial Works.
Note: 1/produce for both domestic and foreign markets.
Distribution Channels
The distribution channels can be classified, according to the target groups, into 2 main markets which are 1) domestic and foreign car manufacturers market : the manufacturers will directly contact their customers and deliver products according to orders; 2) spare parts market: will mainly distribute products through distributors in order to cover all regions.
Production
Raw Materials and Sources
The raw material for producing aluminum alloy wheels is aluminium alloy ingot which is a metallic bullion. But since there is no bauxite, which is for being smelted into aluminium, in Thailand, the aluminium alloy ingot which is used in the country are all imported. The major sources are from the United Arab Emirates, Australia, Russia, and Bahrain. However, the manufacturers can purchase aluminium alloy ingot from local distributors, i.e. Nikei Thai Aluminium Co., Ltd., Sophonpan Co., Ltd., and Akephol Aluminium Co., Ltd.
Cost Structure of Aluminum Alloy Wheel Industry
Category Percentage
1. Raw Materials 52
- Imported Raw Materials 100
2. Wages 5
3. Depreciation and Others 43
Total 100
Source: Interview manufacturers
Production Process
The production of aluminum alloy wheels can be conducted in 3 different ways
1. Low pressure-- drawing the melting alloy into a vacuumed mold
2. High pressure--injecting the melting alloy into a mold
3. Gravity die casting--it is the most popular process in Thailand. It is a process of pouring melting alloy into a mold, casting and cutting, heat treatment, CNC machining, hole machining according to each order/model, and painting. There is an inspection at each step. The manufacturer has to use the centrifugal force procedure in this production process, so that the molecule of the alloy will be firmly attached for strength and durability.
Gravity Die Casting Production Process
Aluminium Ingot Melting
Casting & Cutting
|
v
Heat Treatment
|
V
CNC Machining
|
V
Value & PCD Hole Maching
|
V
Air Leak Testing
|
v
Painting
|
V
Final Inspecting
Source: Interview manufacturers
Machines for Production
With five steps of the production process: Melting, casting, plating/oven-heating, lathing, and painting, a large amount of investment is required, especially for the machines and equipment for casting and lathing processes. Therefore, the manufacturers prefer to import final products from other countries and/or through local distributors. For the melting and plating/oven-heating processes, there are manufacturing factories in Thailand which can produce and install the machines according to the customers' specifications, i.e. KoYo Manufacturing (Thailand) Co., Ltd. However, from the survey of some international joint ventures, the machines being used in the production process are imported with the provision from parent companies. For example, Enkei Thai Co., Ltd, the largest aluminum alloy wheels manufacturer in Thailand, imports all machines and equipment from Enkei Engineering Co., Ltd. in Japan.
Investment and Finance
The investment in aluminum alloy wheel industry, especially for those manufacturers who export their products to other car assembly plants, requires the location of factory to be near the target customers. The convenient ground and water transportation is important. Due to the perimeter of 13-17 inches and the weight of 2.2-2.8 kg of each alloy wheel, the quantity of alloy wheels transported at each time is limited, which results in a higher cost. Based on the scenario of production volume of 200,000 wheels per year and 20 working hours per day, the investment and equipment required are as followed:
Initial Investment
1. Registered Capital and Initial Investment 200 million baht
- Land and Building 20 million baht
- Machinery and Equipment 166 million baht
- Vehicle and Others 14 million baht
2. Working Capital 20 million baht/year
Personnel
Aluminum Alloy Wheel Industry requires 90 employees as follow:
1. Employees in the Factory
1.1 Workers 58 person
1.2 Machanics 15 person
- Engineers 5 person
- Supervisors/Experts 2 person
2. Office Staff and Administration Staff
2.1 Accounting and Financing 2 person
2.2 Marketing 3 person
2.3 Buyer 1 person
3. Executive Staffs 4 person
Annual Expenses
1. Cost of Production
1.1 Cost of Raw Materials
- Aluminum Alloy Ingot 85,000,000 baht/year
1.2 Wages 20,000,000 baht/year
1.3 Cost of Depreciation 16,000,000 baht/year
1.4 Overhead Costs 29,000,000 baht/year
Total Cost of Production 150,000,000 baht/year
2. Cost of Sales and Administration
2.1 Salaries 6,000,000 baht/year
2.2 Utilities
- Telephone Cost Telegram Postage 500,000 baht/year
2.3 Transport Cost
- Vehicle 700,000 baht/year
- Transport Cost/ Export Expenses 1,500,000 baht/year
2.4 Miscellaneous Expenses 3,300,000 baht/year
Total Cost of Sales and Administration 12,000,000 baht/year
3. Interest Expenses 4,000,000 baht/year
The average profit is approximately 8% of total sales.
Note: The average sales turnover stood at 160,000 wheels p.a., the average price per unit was 1,130 baht, and the annual earnings totalled 180.80 million baht.
Appendix
Table 1: Exports of Aluminum Alloy Wheels in 1995-19991
Year Quantity % Change Value % Change
(kilograms) (million baht)
1995 2,066,156 52.87 302.37 82.47
1996 2,109,154 2.08 277.70 -8.16
1997 5,031,752 138.57 737.87 165.71
1998 11,284,311 124.26 1,766.45 139.40
1999 (Jan-Jun) 7,566,464 69.35 1,015.04 29.63
Source: The Customs Department
Note: Customs tariff H.S. code 8708.700-004 comprises wheels and parts and accessories of all vehicles, including tractors. However, more than 80% of exports of this customs code were aluminum alloy wheels. Each wheel weighs about 2.2-2.8 kilograms.
Table 2: Major Export Markets in the First Half of 1999
Country Percentage
1. Japan 33.33
2. United States 22.16
3. Belgium 16.95
4. Australia 4.86
5. Switzerland 3.97
6. Others 18.77
Total 100.00
Source: The Customs Department, calculated by SCB Research Institute
Table 3: Imports of Aluminum Alloy Wheel in 1995-1999
Year Quantity % Change Value % Change
(kilograms) (million baht)
1995 2,545,583 32.93 184.71 -5.95
1996 20,092,698 689.32 144.00 -22.04
1997 2,064,749 -89.72 84.20 -41.53
1998 589,031 -71.47 44.33 -47.36
1999 (Jan-Jun) 649,653 111.66 26.08 15.05
Source: The Customs Department
Note: Customs tariff H.S. code 8708.700-004 comprises wheels and parts and accessories of all vehicles, including tractors. However, more than 50% of imports of this customs code were wheels and parts and accessories for use with tractors.
Table 4: Major Import Markets in the First Half of 1999
Country Percentage
1. Japan 55.47
2. United States 18.41
3. Germany 8.13
4. Italy 4.05
5. Taiwan 3.24
6. Others 10.70
Total 100.00
Source: The Customs Department, calculated by SCB Research Institute
Rules and Regulations
1. Imports and Exports: Subject to the customs inspection procedures of the Customs Department.
2. Tariff: The import of aluminium ingot, harmonized code 7601-100-906 untainted aluminum and harmonized code 7601-200-908 tainted aluminum, is subject to a customs duty of 1% of import price, effective on January 1, 1999
3. Permit for Plant Establishment
4. Investment Promotion Support: All interested parties can obtain investment promotion support. Documents and application form (Kor Kor Tor 01) are available at Investment Service Center, the Office of the Board of Investment: Head Office: Bangkok, Viphavadee Rangsit Road, Jatujak, Tel. (662) 537-8111-55 and Regional offices: Northern region (Chiengmai) Tel. (053) 203-397- 400, Eastern region (Chonburi) Tel. (038) 491-820, Northeastern region (Nakornrajseema) Tel. (044) 213-184, Southern region 1 (Songkla) Tel. (074) 347-161-5, and Southern region 2 (Surajthani) Tel. (077) 213-698-9.
5. Application for Standard Quality System: In addition to the ISO 9001, a well- known product quality standard in the exporting industry, QS 9000 is also the management system standard for cars manufacturing and assembling factories. It is acceptable worldwide with the initiation of setting up the criteria for their parts manufacturers by major car manufacturers, Ford General Motors and Chrysler, in the United States. There are over 300 strict criteria for QS 9000 which also cover all those under ISO 9001. These criteria are accepted worldwide and will be used as a replacement of follow-up inspection which is directly conducted by customers. Therefore, it is mandatory for Thai alloy wheels manufacturers to receive the ISO 9001 and QS 9000 if they want to be competitive in the world market. Moreover, there are also other standards in the aluminum alloy wheels industry in Thailand, for example, JWL of Japan, VIA of Japan, and TUF of Europe.
--Department of Industrial Promotion--