Auto outlook good

Auto outlook good

Strong policy boosts Thailand's attractiveness as a vehicle production destination.

Thailand remains a regional and global outperfomer in the recently updated Autos Production Risk/Reward Index (RRI) by Fitch Solutions. This reflects low average wages and a sound automobile policy that offers automakers an attractive production base.

A well established industry reflected in large vehicle production volumes with a variety of automakers present also bolsters its appeal.

Weighing on Thailand's appeal is its long-term political risk outlook, which could create risks for automakers present in the country where policymaking is concerned. Among the conclusions from the latest RRI update:

Thailand's overall score has dropped to 68.4 (out of a possible 100), from 69.5 in the previous quarter. The country's score continues to outperform the Asian average, currently 58.3, and the global average of 50.0. The country moved down to fourth place in Asia from third in the precious quarter, and to sixth place globally from fourth.

Thailand's key strengths lie in the sheer size of its auto manufacturing industry, reflected in its score of 80.4 for the vehicle production volume indicator; its diverse competitive landscape (scoring 92.9), its strong automotive policy (81.3) and its low cost of labour, scoring 82.1 out of a possible 100.

The country's weakness is its long-term political risk outlook, reflected in its score of 21.4. This can lead to uncertainty pertaining to policymaking.

Thailand also gets a strong score of 82.1 out of a possible 100 for manufacturing capability. This indicator includes a measure of complex goods as a percentage of total manufacturing, and is better suited to assessing how well a country can adopt higher value-added manufacturing such as electric vehicle production and various associated components of new-energy vehicles.

The country also benefits from having better logistics infrastructure (57.1) when compared to its regional (52.7) and global peers (50.0), which is crucial in enabling automakers to export finished products in an efficient manner.

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