Chip shortage sparks 5-10% price hike

The Federation of Thai Industries (FTI) expects car prices to rise by 5-10% in 2023, mainly because of the prolonged impact of the global semiconductor shortage.

The new prices will apply to both domestic and overseas markets, given the higher prices of raw materials, said the group.

Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for its Automotive Industry Club, said chip scarcity will continue to be a major challenge for the Thai automotive industry this year.

"It's difficult to forecast car production in Thailand in 2023," said Mr Surapong.

Last year, the club downgraded Thailand's total car manufacturing target to 1.75 million units, a dip from 1.8 million units, after the Russia-Ukraine war worsened the prolonged global semiconductor shortage as the two countries are major exporters of neon gas, a key material in chipmaking.

The chip shortage is a major factor driving up car prices, while Covid-19 outbreaks in China affected the supply of auto parts to manufacturers, eventually leading to product scarcity and subsequent higher prices, he said.

"We have talked about the situation with car companies. They said they need to adjust car prices because chips and auto parts are out of stock," said Mr Surapong.

Manufacturers will also see their operating costs increase this year if the government does not tackle the increase in electricity bills after the Energy Regulatory Commission (ERC) decided to increase the power tariff, he said.

The ERC announced in December it would increase the power tariff for businesses by 20.5% to 5.69 baht per kilowatt-hour (unit), up from 4.72 baht per unit.

The decision caused business leaders to ask the government to put a cap on the fuel tariff (Ft), a main component of the power tariff, for one year to help Thailand avoid an unpleasant impact as the economy recovers. The surge in Ft resulted from higher imports of costly liquefied natural gas, a key fuel for electricity generation.

FTI members indicated earlier they would increase product prices by 5-12% if the new power tariff takes effect.