Thailand: Regaining Strength as SEA’s Automotive Hub

20 Sep 2021   |  Thailand

As one of the largest automotive manufacturers in Southeast Asia, Thailand’s automotive market accounts for over half of the cars distributed to domestic and foreign coverages. The country reached 792.000 units of car exports last year despite the contraction due to the COVID-19 pandemic.

Given the latest economic condition, the numbers are expected to increase to 1.5 million units in 2021 slightly. Thailand's well-put automotive infrastructure and the dynamic network of players in the industry encompasses Thailand's vast car production market.

Complexity caused by the COVID-19 pandemic

Like other tertiary needs, automotive experienced the most complicated damage as people implemented mobility restrictions to restrain the spread of the COVID-19 virus. Due to the pandemic, Thailand's car export value dropped 35 percent compared to 2019.

However, as countries worldwide inoculate their citizens and reopen economies, Thailand's export industry has shown signs of recovery. Previously, the weakening global demand has forced consumers globally to save up for any unforeseen circumstances that might happen due to the COVID-19 pandemic.

In the first half of this year, Thailand’s automotive market grows at a 19.5 percent rate, albeit still significantly lower than the pre-pandemic levels. The industry recorded over 429.500 sales of passenger car units, with Toyota leading the growth by a 10.3 percent rise and establishing a 32.9 percent market share of the overall automotive market. In contrast, as the renowned luxury car brand, Mercedes-Benz recorded a drop of sales by 18.8 percent.

Growth induced by Japanese players’ development

Since recent years, Japanese automotive players' agile growth has dominated Thailand's market and put the country as the most robust Southeast Asia car production base. Thailand is now the fifth strongest car producer, following Japan, South Korea, China, and India.

The reason for Thailand's resilient automotive industry is due to the government's friendly regulations that involve reductions in import duties for machinery, raw materials, and land ownership rights.

The business ecosystem allows entrepreneurs to execute their operations and push the country into becoming a production hub for import and export activities.

Today, Thailand hosts over 23 car assembly plants, eight motorcycle plants, 368 auto parts makers, and employs over 850.000 labor in the automotive industry, positioning the sector as the second-most essential driver of Thailand's economy by contributing around 12 percent to the GDP every year.

Thailand’s trend in the automotive industry would likely enter a new horizon, with the newly scrapped tariffs of the Philippines on Thailand's imported cars. The Philippines has established import duties for all Thailand's car imports transactions starting from August 6th, involving passenger cars and pickup trucks to adhere to the latest law update.

The measure would allow Thailand to retain its automotive market share in the Philippines, bringing a value of more than 70 billion baht per year.

Thailand's vision to adopt zero-emission vehicles by 2035 also drives the country's innovation for a more sustainable business model of green vehicle productions. The plan would demand companies to prepare for the upcoming trend that would require businesses to comply with Thailand's soon-to-release standardization for electric vehicle components and procurement.

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