(source: Thailand Investment Review, December 2015)
Thailand occupies a prominent position as a key vehicle manufacturer. With its reputation as the Automotive Hub of ASEAN, the country offers fantastic prospects for growth with a world-class production base, vast set of consumers and an expanding automotive export market. This year’s outlook is promising, with excellent opportunities in international sales and sourcing. The Thai automotive industry ranked 12th globally for motor vehicle production (2014) and 5th for global motorcycle production (2014). With interesting incentives on offer for strengthening the country’s value chain and the development of eco-cars, the automotive industry is definitely on the rise.
In 2014, 1.88 million cars were produced in Thailand, according to the Thai Automotive Industry Association. Recent figures forecast a robust growth with a 6% year-over-year (y-o-y) increase in car production, reaching 2 million cars in 2015. Thailand’s export target for 2015 is 1.20 million vehicles. The thriving production is largely due to the 1-ton pickup truck, which is a product champion, consisting of more than half of the production base (51%). Interestingly, the eco-car is also gaining a strong presence, thanks to intensive government support, accounting for 19% of total production. With an 11% y-o-y increase in production for motorcycles and a projected production figure of 2 million motorcycles in 2015, the future looks quite bright for this segment too.
Thailand Captures the Number One Position in ASEAN
Thailand’s active participation within ASEAN has opened numerous opportunities in various industries, including the automotive industry. In 2014, the ASEAN community produced 4 million vehicle units, with domestic sales amounting to 3.2 million units. These figures represent an impressive double-digit Compound Annual Growth Rate (CAGR) growth of over 14% in production and 10% in domestic sales through the past 5 years, with strong production capabilities and an equally strong demand being responsible for this rise.
Thanks to its solid automotive supply chain and a strong production base, it’s no surprise that Thailand is considered to be the number one automotive production base in ASEAN. Thailand has single-handedly contributed significantly towards the ASEAN automotive industry with its 1-ton pickup, making off with a striking 47% of the regional share of automotive production in 2014. This successful trend is expected to continue through 2015, with Thailand’s projected contribution hitting 49% of total ASEAN production.
What’s over the Horizon
The automotive industry has always been a cornerstone for Thailand and its prospective future looks promising with support from the government in the form of a structured plan. The Master plan ranging from 2012-2016 lays out a vision for the automotive industry projecting it as “a global green automotive production base with strong domestic supply chains that create high added value” by the year 2021. The government has implemented numerous initiatives, including those that support eco-car development, to help the country attain this goal.
The eco-car development phase II is expected to boost the country’s production capabilities and enhance its competitiveness. Automakers can expect to be granted incentives, when they develop eco-cars that satisfy certain criteria, including adopting Euro 5 emission standards, an average fuel consumption figure of 4.3 liters/100 kilometers, an average CO2 emission of 100 grams/kilometer and the relevant safety standards. The country looks likely to maintain its competitive position with regard to these efficient and environmentally safe eco-cars, maintaining a strong standing in this area.
The Super Cluster Project is another key initiative that supports the development of the automotive and supplier industry in Thailand. It proposes strengthening the value chain and increasing investment capacity for current and new investors, as well as expanding business growth in upcountry provinces and small medium enterprises. The 7 targeted provinces include Ayutthaya, Patum Thani, Chonburi, Rayong, Chachoengsao, Prachin Buri and Nakhon Ratchasima. Under this new policy the production of motorcycles (more than 248 CC), engines, tires and other important parts which have no to low production are given high consideration.
Putting It All Together
As the automotive industry races forward, Thailand’s global and regional position looks strong. The country is a regional vehicle production and export base for some of the world’s best carmakers. With support being offered for the production of eco-cars and the Super Cluster project initiative, Thailand looks set to meet its production target of 3 million cars in 2017. Current and prospective investors can look forward to being supported by well-developed policies and a steady growth in both the demand and supply side of the industry.
From its infancy, consisting of a single automotive assembly plant in 1961, the Thai automotive industry has grown to be a mature world-class production center with nearly all of the world’s leading automakers, assemblers and component manufacturers, establishing operation bases in the country.
Thailand is considered to be an ideal automotive hub for many reasons. Apart from its prime geographical position within the Asian market, the country has also networked with numerous Free Trade Agreements to enhance its competitiveness and is fully equipped with a highly skilled, low-cost workforce.
Strong government support has reinforced Thailand’s commitment towards its automotive industry. Numerous initiatives such as the eco-car and the development of the Super Cluster Project are taking Thailand’s automotive industry towards exciting new horizons.