BMW Thai unit expansion hinges on AFTA plan

BMW Thai unit expansion hinges on AFTA plan

BANGKOK (Dow Jones): The Thai unit of Germany's auto maker
Bayerische Motoren Werke AG, believes Thailand has great
potential to become its regional hub for production and export
but says that expansion depends on the development of free trade
in the region.

"Thailand is the only country in Asia where we have invested
in a plant. This is a strategic investment for BMW," Karsten
Engel, president of Bayerische Motoren Werke (Thailand) Co., told
Dow Jones Newswires in an interview.

BMW has invested around US$25 million in the Thai assembly
plant which has an annual capacity of 10,000 units but is
currently running at only less than a fifth of its capacity, he
said.

Engel said any increase in production volume and capacity will
depend on the growth rate of domestic sales and on the speed at
which the Association of Southeast Asian Nations' Free Trade Area
agreement, or AFTA, moves to remove tariff barriers for the
automotive industry.

"Our expansion has to be in line with the development of the
AFTA agreement. At the moment we have enough capacity to export
to all countries in Asia," said Engel.

Earlier this year, AFTA suffered a setback as Malaysia decided
unilaterally to delay tariff reductions on cars and parts until
2005, from 2003 as earlier agreed. Although the move has upset
Thailand and foreign investors, a meeting last week among AFTA
members formalized the delay, allowing Malaysia to compensate its
partners for not reducing tariffs on cars.

Malaysia stood firm by its decision, arguing it needs to
protect its national car maker Perusahaan Otomobil Nasional Bhd.,
known as Proton.

The tariff barrier removal will provide a great opportunity
for BMW to export from Thailand to the rest of Asia, Engel said.

"From our current investment plan, we can expand our capacity
to 30,000 cars per annum, but when we'll do it depends on AFTA,"
he said.