Thai auto industry needs a reboot

Thai auto industry needs a reboot

Five scenarios considered to determine whether shift to BEV production will be the best choice

A mechanic works on an assembly line at an automotive plant in Prachin Buri province. Various factors are influencing automotive trends according to LiB Consulting.  (Photos: Pattanapong Hirunard)
A mechanic works on an assembly line at an automotive plant in Prachin Buri province. Various factors are influencing automotive trends according to LiB Consulting.  (Photos: Pattanapong Hirunard)

The Thai automotive industry faces a number of challenges as it seeks to deal with the changes introduced by the emergence of battery electric vehicles (BEVs), according LiB Consulting.

Thailand is one of the leaders in parts manufacturing for internal combustion engine (ICE) vehicles in Southeast Asia. However, the emergence of BEVs is shaking the foundations of the industry as it seeks to maintain its position by following changing consumer trends in the automotive market, says the Japanese business consultancy, which also has a branch in Thailand.

Various factors are influencing automotive trends, and stakeholders in the Thai automotive industry should monitor them closely. LiB has outlined five possible scenarios that could unfold between now and 2030:

1. Lower vehicle production: As the world's focus on BEVs increases, Thailand will face a contrary situation because it is not a manufacturing base for BEVs.

  • The lack of balance between manufacturing capabilities and consumer demand could reduce car production for export due to reduced ICE demand from abroad.

2. Thailand will become a major ICE manufacturing hub: While the BEV trend continues, global demand for ICE and hybrid vehicles will persist due to insufficient BEV infrastructure.

  • Thailand will still maintain its position as an ICE hub. However, Thai businesses should acknowledge that exports may decline due to lower global demand.

3. Thailand will mainly manufacture BEVs for domestic use with low exports: Thailand will become a parts manufacturing hub specifically for domestic BEVs, but the country will see a steep decline in exports as carmakers shift their export hubs to Indonesia, Vietnam or China to benefit from lower wages and greater availability of battery materials.

  • Thailand will lose 40-50% of its current automotive manufacturing market share.

4. Thailand will become a hub for BEV assembly and exports: Based on the current EV consumer trend in Thailand, the country will see an opportunity to serve as a BEV parts manufacturing base for existing carmakers for domestic use and export.

  • Most BEV parts will likely be manufactured in Thailand, except for the parts for which the country lacks resources, such as batteries.
  • Nevertheless, batteries may be imported for assembly if Thailand sees higher BEV demand. New players may choose Thailand as an assembly hub to benefit from lower tariff walls.

5. Thailand will become a BEV manufacturing hub for exports to Asean: Western countries like the US and the UK, as well as China, will invest significant sums in their BEV infrastructure.

  • There is a plan to set up a consortium similar to Airbus to develop and manufacture compatible batteries for BEVs.
  • On the other hand, Japan shows a low interest in this approach.
  • Thailand can seize the opportunity to adapt with more investment and R&D for new BEV-related technologies from both old and new players.
  • In this way, it could be easy for Thailand to become a BEV manufacturing hub for Asean.

While these scenarios are not an attempt to accurately predict the future, LiB Consulting's goal is to map out the spectrum of possibilities and help Thai businesses prepare for possible opportunities or threats. It also invited two leading industry executives to comment on how they see the next few years playing out.

"At present, both the government and private sectors aim to promote Thailand to be an EV hub to drive the economy and create jobs," said Kritsada Uttamote, president of the Thai Electric Vehicle Association. "If the government can achieve the goals of promoting EV growth and usage, there is a high chance that Thailand will achieve its BEV regional hub status.

An electric vehicle is displayed at last year's Motor Expo. The emergence of BEVs is shaking the foundations of the industry according to the consultancy. 

"EV support measures should prioritise the EV ecosystem by promoting the growth in EV charging station investments and supporting workforce development for autonomous, connected, electric and shared vehicles. The government can cooperate with the domestic and overseas private sectors and research institutions to manage the clean energy transformation to achieve net zero.

"Technological transformation can allow new businesses to build their value chain in line with changing global trends. However, Thai parts manufacturers are still highly concerned about the impact of the BEV transition on the existing supply chain."

Sompol Tanadumrongsak, president of the Thai Auto-Parts Manufacturers Association, noted that at present, Japanese companies hold more than a 70% market share in the Thai automotive market.

"I think Thailand can still maintain the ICE manufacturing leadership that has been our strongest advantage for 50 years while simultaneously attracting new players from China," he said.

"The changes will gradually take place, and Thai businesses should adapt to the emergence of BEVs by acquiring new technologies to improve existing manufacturing processes. Many countries with prominent ICE manufacturing foundations face similar challenges and are seeking the best course of action to welcome the emerging BEV trend. It is undeniable that the market is seeing soaring demand for BEVs, but the demand for ICE will persist as well."

The emergence of BEVs can provide opportunities for Thailand to develop strength in travel and travel-related services due to higher domestic BEV demand. However, this poses some risks that may hinder the country from achieving its goals.

If existing players are too hesitant to launch BEV manufacturing and lose market share, the local BEV manufacturing industry will fail to generate high added value.

The best course of action, in the view of LiB Consulting, is a two-leg strategic approach. Thai businesses should preserve the advantages of the Thai automotive industry and develop new potential, learn new things and adapt to the trends simultaneously to satisfy the requirements of the future supply chain.

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