Thailand is the dominant automotive hub of South East Asia with a very robust logistics and supply chain backed with impressive production figures for both domestic and export markets. Thailand was the largest car manufacturer in the ASEAN Region and 11th in the world with 23 car assembly plants, 8 motorcycle plants, 386 tier-one auto parts makers, and 1700 tier-two and tier-three auto parts manufacturers. The automotive industry in Thailand employs over 850,000 people with automotive product exports worth a staggering 950 billion baht (during 2018) according to the Federation of Thai Industries (FTI).
The automotive sector is a major driver of the Thai economy contributing to about 10-12% of the GDP with a strong infrastructure and vast network of small and large, local and foreign companies encompassing the entire car-production supply chain.
COVID 19 Pandemic Effect
Last year, there was a prediction from the Ministry of Industry expecting that 2.2 million cars will be manufactured in Thailand, comprising 1.1 million cars for domestic sales and another 1.1 million cars for export. Thailand is the eleventh largest car manufacturer in the world. It produced more than 2 million cars in 2019. Federation of Thai Industries however expects only about half of it to be manufactured during 2020 due to the current pandemic. During 2020, about 1 million vehicles will be manufactured in Thailand with about 50% contributing to exports, as a result of partial production capacity during the crisis days of the pandemic.
However, Kasikorn Research Center’s projection of 1.5 million cars produced in 2020 is on the optimistic side which may very well be achievable if the situation is controlled and production is in full swing for the last 5 months. The current economic crisis incidentally is affecting even the parent companies in Japan, Europe, and the US which in turn bootstraps the subsidiaries in Thailand to operate in a restrained situation and produce much lesser than capacity.
Thailand’s car exports fell 35% year-on-year during the first five months of 2020 to 158.7 billion baht in value, pressured by the global economic slowdown and travel restrictions caused by the coronavirus crisis. As of May 2020, car production fell 69.1% year-on-year to 56,035 units. Of the output, 20,070 were produced for the domestic market (down 76.9% year-on-year) and 35,965 were for export (down 61.9%).
However, as Thailand has been able to keep a very low number of total Covid-19 cases in the country, due to strong discipline and management, the auto industry is poised to recover growth in the remaining months of the year. Vehicle production in the first two weeks of June rose 126.8% year-on-year, thanks to key manufacturers reopening plants after a month-long shutdown.
As per Krungsri’s report, as of July, production is expected to shrink by 36- 37% in 2020 to 1.27-1.29 million units. However, in 2021 and 2022, as Covid-19 is brought under control and economies recover, it is expected to grow by 3.0-4.0% per year to 1.32-1.33 million and 1.36-1.38 million vehicles, respectively.