K-Research predicts mild car export growth in 2019

K-Research predicts mild car export growth in 2019

Manufacturing's drift to Europe will pressure some shipments

Toyota pickup trucks await shipment at Laem Chabang port in Chon Buri province.
Toyota pickup trucks await shipment at Laem Chabang port in Chon Buri province.

Kasikorn Research Center (K-Research) forecasts Thailand's car exports in 2019 to grow by 1-4% to 1.15-1.18 million units as the country faces myriad negative factors from Europe and North America.

According to the research house's report, shipments to Europe will drop by roughly 4% to 118,000-123,000 cars in 2019. Many car companies have relocated their production facilities to Europe or surrounding countries, anticipating trade privileges.

Based on figures from the International Organization of Motor Vehicle Manufacturers, many countries in Europe increased their output during 2013-17.

For example, France's production rose from 1.74 million in 2013 to 2.23 million cars in 2017. Turkey made 1.7 million cars in 2017, up from 1.126 million in 2013, while the Czech Republic produced 1.42 million in 2017, up from 1.134 million in 2013. Italy made 1.142 million cars in 2017, surging from 658,206 in 2013.

"Apart from free-trade agreements that European members can enjoy in shipments to each other without customs duties, many European governments have announced a ban on the use of diesel engines long-term, meaning demand in that region will drop significantly in the future and put pressure on the production of diesel-powered pickups from Thailand," K-Research said.

"To maintain shipment volume for Europe, Thailand should seek new opportunities in eco-friendlier vehicles, as each country's policies are emphasising controls on CO2 emissions and supporting the use of electric vehicles."

For car shipments to North America, K-Research said Thailand is facing uncertainty from the trade war between the US and China, as well as the new United States-Mexico-Canada Agreement (USMCA) that takes effect in 2020.

"Some car companies will gradually invest more in the USMCA countries because the agreement tightens rules for original-made countries and encourages new manufacturing in member countries, so Thailand's car exports to North America will suffer from 2019 before other agreements take place," K-Research said. "Other side effects from the trade war will cause volatile movements for global currencies and increase policy interest rates in many countries -- Thailand's exports cannot avoid those troubles as well."

K-Research said the 1-4% rise in Thailand's car exports in 2019 will be driven by two regions, Oceania and Asia, that represent more than 50% of total shipments.

"Thai-made pickups can perform very well in those two regions," K-Research said. "Although Thailand faced obstacles in shipping cars to Vietnam during early 2018, both governments have agreed to resolve this and ease the complex process at Vietnam ports."

The Vietnamese government in October 2017 issued Decree No.116 to set out conditions for the manufacture, assembly, import and offer of warranty and maintenance services for cars.

The decree, which came into force in January 2018, states that car companies will be considered for automobile import business licences. The companies must also have facilities for automobile warranty and maintenance.

Notably, the decree put forward stringent requirements for auto importers to obtain documents that authorise them to act on behalf of foreign automobile manufacturers and assemblers to recall imported cars in Vietnam.

The Federation of Thai Industries said the measure is a non-tariff barrier by Vietnam in a bid to protect the initial development of the automotive industry after all car imports into Vietnam were subject to 0% customs under the Asean Free Trade Area from 2018.

K-Research said Vietnam imported 36,600 cars from Thailand in January-October 2018 for a value of US$724 million (23.2 billion baht), up 60.4% from the previous year.

Vietnam ranks as the fourth-largest shipment destination for Thai-made cars after Australia, the Philippines and New Zealand.

"We are very optimistic about sentiments for 2019 in Vietnam, particularly for passenger cars under 1,500cc, because prices are affordable and many car companies have allocated passenger car production in Thailand for the Vietnam market," K-Research said. "We project the export of 61,000-65,000 cars to Vietnam in 2019, a 14-22% rise that will make Vietnam the third-largest destination."

For 2018, K-Research estimates that total car shipments dropped 0.5% to 1.135 million units.

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