(source: Thailand Investment Review, March 2017)
Despite improving public transportation networks, the automobile remains central for people’s everyday lives providing both convenience and a trusted means to get around. A 2015 study by the International Organization of Motor Vehicle Manufacturers (OICA) showed that a majority of people around the world, approximately 60%, could not imagine living their lives without an automobile as it is the most efficient means of transportation.
The OICA pegged total global sales of new vehicles in 2016 at 94 million units, a 25% increase from 2010 and where countries in Asia, Oceania, and the Middle East together comprised over 50% of global sales.
ASEAN market and Thailand’s growth prospects
ASEAN countries have experienced double-digit growth in vehicle sales in recent years, with Cambodia, Laos, Myanmar and Vietnam (CLMV) strongly contributing to growth in this sector.
Cambodia experienced 85% growth in new vehicle sales from 2013 to 2016 alone. Laos has been one of Thailand’s most important markets for vehicle exports, with over 60% of their imported vehicles coming from Thailand.
The data for Myanmar shows some interesting characteristics, with a relatively small portion of new vehicle sales. However, they have a moderately high car density rate as the country has a massive second-hand automotive market. They have been importing second-hand vehicles from Japan and Thailand on a massive scale over the past decade.
From 2013 to 2016, growth in sales of new vehicles was over 180% in Vietnam, one of the fastest-growing rates in the world.
Owing to the size of their respective populations and the high growth in FDI in CLMV which is driving demand in the automotive market, Thailand is strongly benefiting from this growth trend as the main exporting country.
Decades in the global automotive market
The automotive industry has been a major pillar in Thailand over decades. In 2016, it contributed 12% of GDP, worth THB 944 billion (USD 27 billion), according to the Federation of Thai Industries.
In 2016, Thailand was ranked the 13th largest automotive parts exporter and the 6th largest commercial vehicle manufacturer in the world, and the largest in ASEAN.
Even still, Thailand has ambitious targets and expects to manufacture 3,500,000 units by 2020, thereby improving on its status as one of the top performers on the global automotive stage.
Defining “Next-Generation Automotive”
The next generation automotive sector will follow three criteria: firstly, environmentally-friendly with low carbon emissions, secondly, safe, and thirdly, cost-efficient.
A wider spectrum applies ranging from hybrid to plug-in hybrid to battery electric vehicles (BEVs).
From the consumer’s perspective, EVs generally cost about a third comparing to gasoline-powered vehicles. Electricity prices, however, are more stable than gasoline prices, and EVs often have lower maintenance costs.
In 2015, the number of Electric Vehicles (EVs) on the world’s roads passed the one million threshold for the first time in history. Although still small, the EV market is growing exponentially, owing to several factors including, the rapid development of EV infrastructure and technological advancements in EV batteries, which have helped cut the cost of batteries by 65% over the past five years. Tesla, the biggest and best-known player in electric vehicles aims to lower battery production costs by over 30% by 2020 (USD 150 for kilo-watt per hour to USD 100 for kilo-watt per hour).
According to Bloomberg New Energy Finance, EVs will gain increasing market share and is expected to account for 38% of the automotive industry by 2040 compared to only 1% in 2015.
China has set a national agenda to reduce oil imports and is on the road to becoming energy self-sufficient. The implications for the EV market in China are enormous.
In 2016, China surpassed the US as the largest EV market in the world, with the new EV registration rate jumping by 183% from 2015. Moreover, Japan is the second-largest EV market in Asia.
These two markets are heavily supported by their governments’ policies, such as government subsidies of up to 25% on EV purchases and most importantly, providing the necessary infra- structure which has become more established. In China, there were 85,000 charging stations as of June 2016, a 65% increase compared to 2015. Japan reached an important milestone in EV infrastructure with the number of EV charging stations in the country now higher than the number of petrol stations.
Furthermore, the growing EV market will open up business opportunities for other industries in the energy sector, including investments in power plants, EV charging stations, and battery enhancement.
Thailand’s Next Automotive chapter
As the trend towards next-generation auto-motive is growing in importance, the Thai government has been working to ramp up Thailand’s competitiveness in this sector.
The government is targeting having over 1.2 million electric vehicles with 690 charging stations in place by 2036. To achieve this goal, related government agencies are collaborating to implement the reality of next generation automotive.
This year, the Ministry of Energy is working on a joint plan financially supported by both the government and private sector to build 100 charging stations.
The Ministry of Transportation launched a pilot program deploying 20 electric buses in 2016, and plans to add another 200 electric buses this year, ramping up efforts to provide a clean transportation option to the public.
The government’s efforts also include investing THB 3.6 billion (USD 103 million) to build a National Automobile and Tire Test Center to support Thai and foreign automotive parts producers at every business level to further enhance technological advancements, innovation, research and development, and to increase productivity through knowledge sharing between producers.
This will be the first such center in ASEAN. The master plan is being finalized and the center is expected to be operational in 2018.
These ambitious moves and firm support by the government will ensure that the private sector understands that Thailand is ready to turn the page to next generation automotive. Many leading automotive companies have already established their production plants for electric vehicles in Thailand. Included in this group is BMW, which has expanded their Plug-in Hybrid Electric Vehicle (PHEV) production plant not only to serve the Thai market but also to export to China; Mercedes-Benz, which has also expanded their production line of PHEVs to Thailand; and FOMM, a Japanese electric vehicle manufacturer which is planning to establish electric vehicle production plant in Thailand with battery production also done domestically.
This marks an important next step for Thailand as the country builds on its auto-motive legacy and paves the way for a brighter and cleaner future in becoming a leading global, fuel-efficient automotive production hub.