Thailand’s $53 billion vehicle business is going through a grim future as extremely indebted home shoppers wrestle to finance purchases and abroad patrons of its mainstay conventional automobiles more and more swap to electrical alternate options.
The disaster in Southeast Asia’s largest automobile manufacturing hub has pressured cuts to output and jobs, and sparked measures from the federal government to attempt to reverse its fortunes.
It’s already rippling by firms corresponding to Techno-Metallic which has been manufacturing forged iron undercarriage components for Japanese automobile makers.
Manufacturing on the firm’s two factories in Thailand’s Chon Buri province is at the moment solely 40% of peak capability, and its workforce has steadily declined as orders have eroded, mentioned Deputy Basic Supervisor Nattaporn Chewapornpimon.
“On the finish of final yr, there have been about 1,200 employees. Now, there are 900 left,” she mentioned. “We’ve additionally lowered working hours to 75% and lower extra time.”
Manufacturing in Thailand’s vehicle business has been on a downward pattern for the final yr, sliding 20.6% in August on a yearly foundation. And home gross sales fell to their lowest in 14 years on a 12-month shifting common foundation, business information confirmed.
The auto business is forecasting Thailand to supply 1.7 million automobiles this yr, down from 1.9 million in 2023. Of that, 550,000 automobiles are anticipated to be offered domestically and 1.15 million exported.
“It’s a disaster, fairly a severe one, with no straightforward means out,” mentioned Hajime Yamamoto, a principal at Nomura Analysis Institute’s consulting division in Thailand, including that the stagnant residence market, mixed with elevated competitors in exports is squeezing the auto sector.
The fast-growing electrical automobiles (EV) sector, which has drawn investments of over $1.44 billion from Chinese language EV makers corresponding to BYD, is unable to select up the slack in output for the native auto components business which has about 2,000 firms and employs about 700,000 employees.
“The Thai price construction is 30% larger than the Chinese language,” mentioned Sompol Tanadumrongsak, President of the Thai Auto-Elements Producers Affiliation. “Thai companies can’t actually do it.”
Bother with vehicles
On the coronary heart of the troubles for the Thai auto sector is the pick-up truck section, which contributed almost half of all Thailand’s car gross sales final yr, and is a fixture on its roads, from the jam-packed Bangkok streets to rural trails.
In 2023, greater than 820,000 pick-ups have been exported, or 67% of complete produced, in line with official information. This yr to this point, pick-up truck exports have dropped 8.76% yearly, with manufacturing down 20.51% yearly to 616,549 items, information exhibits.
This has hit Thai corporations as a result of greater than 90% of components of pick-up vehicles are manufactured domestically, and the section alone makes up 70% of the home components market, in line with the auto components affiliation.
Gross sales of auto components are seen down almost 12% this yr at 519 billion baht, the analysis unit of Kasikornbank mentioned.
The principle offender is family debt of $484 billion, or 90.8% of Thailand’s gross home product as of March 2024, among the many highest ratios in Asia, which has put the brakes on automobile gross sales.
Within the first six months of 2024, monetary establishments accredited about 203,000 pick-up loans, in comparison with 722,000 for all of 2019, credit score bureau information confirmed.
The credit score scenario is so tight throughout a number of shopper segments that Thailand’s major EV producers’ affiliation has halved its gross sales forecast for 2024. Present automobile house owners are additionally struggling to pay again their loans.
Business teams at the moment are scrambling to seek out options, with the auto components sector pushing the federal government for extra incentives to international producers of conventional inner combustion engine (ICE) and hybrid automobiles.
“We need to be the final man standing in ICE, particularly in pick-up vehicles, and hybrid manufacturing … draw auto makers to maneuver that manufacturing right here,” mentioned Mr. Sompol.
The federal government plans to supply funding incentives and subsidies for hybrid manufacturing.
“The Japanese have additionally tailored to hybrid know-how to compete and nonetheless want components,” mentioned Surapong Paisitpattanapong, of the Federation of Thai Business’s automotive division.
Thailand’s Board of Funding can be attempting to entice international traders to kind joint ventures with native auto half firms.
“This can change Chinese language EVs into Thai EVs, which might then be exported,” mentioned EV affiliation head Suroj Sangsnit, pointing to tariffs on China-made automobiles from the U.S., EU and India. “There’s nothing aside from this that may enhance the scenario.”
However for some Thai corporations, working with Chinese language EV makers has been a problem, together with due to pricing variations.
“Even when we will (provide Chinese language EVs), the earnings are low,” mentioned Techno-Metallic’s Nattaporn.
“We nonetheless must concentrate on OEM (unique tools manufacturing) for Japanese manufacturers. If they’ve EV plans, that might be a blessing for us.”
Revealed – September 26, 2024 10:46 am IST
