DRIVING FORCE
A combination of slower global economic growth and weaker domestic purchasing power suggests that Thailand's renowned automotive sector is heading for flat growth in 2016, thereby encouraging the government to promote cutting-edge innovation across the industry.
Thailand boasts a decades-long reputation for being a key Southeast Asian production hub for leading US, European and Japanese carmakers. According to Thailand's Board of Investment (BOI), the industry accounts for approximately 12% of the country's GDP, employing over half a million people. This has helped position the Kingdom as the world's ninth-largest automotive producer, ahead of France, Russia, Turkey, and indeed all of its ASEAN neighbours.
Gross output figures suggest that the sector is currently enjoying a period of slight growth with 1.95 million to 2 million units expected to be manufactured in Thailand this year—compared to 1.85 million cars produced in 2015. Worth mentioning is that over half of all vehicles made in Thailand are one-tonne pickup trucks—a segment in which the country leads the global market share. However, when broken down, the figures point out to certain downward trends that are preventing the industry from nearing its potential production capacity of approximately 3 million units. Namely, the slight growth in output is being dragged down by weak domestic consumption; of the 2 million units expected to be produced in 2016, only 750,000 will be sold in the local market. This represents a 6.2% drop on 2015 and, more worryingly, a fourth consecutive annual decline.
In 2012, faced with the aftermath of the global recession and dire international trade levels, the then-government turned to the domestic market to alleviate the industry by running a one-year incentive scheme, offering tax rebates of up to USD3,000 for first-time cars buyers. Predictably, domestic consumption became the backbone of the auto industry with nearly 1.5 million out of the total 2.5 million produced for the local market—a staggering 80% YoY increase. Due to this unnatural spike, however, the market has been struggling to correct itself ever since. Moreover, with the global recovery proving to be slower than anticipated, Thailand's government and leading auto manufacturers are being forced to act innovatively if production levels are to return to their heyday. In March 2016, Thailand's Prime Minister Gen. Prayut Chan-o-cha sat with the heads of four major Japanese carmakers—Nissan, Honda, Toyota, and Isuzu—who combined have a 58% market share of Thailand's exports, in a bid to promote investment into “cars of the future.”
Utilising the abundance of leading auto innovators operating in Thailand, the government has appointed the Ministry of Industry to develop a long-term strategy on how to transform the country into a hub for “future car” production. According to government sources, Toyota and Isuzu have agreed to manufacture hybrid cars and trucks in Thailand, while Nissan and Honda have turned their attention to exports and R&D of electric vehicles.
The slight growth in production levels expected for 2016 is a sign that the country's automotive industry has finally recovered from the distorted marketplace created by the 2012 incentives. Nonetheless, with fresh investments and revolutionary technology expected to rain in over the coming years, a new era for Thailand's carmakers is on the horizon—one that looks far into the future.
DRIVING FORCE
TABLE OF CONTENTS
Review: Diplomacy
The Times are Changing
The West may have taken a dim view on the 2014 coup, but China has been less judgmental about Thailand's domestic policy and the two countries have grown closer over the past couple of years.The West may have taken a dim view on the 2014 coup, but China has been less judgmental about Thailand's domestic policy and the two countries have grown closer over the past couple of years.
read articleGuest Speaker
HE Maithripala Sirisena, President, Democratic Socialist Republic of Sri Lanka
TBY talks to HE Maithripala Sirisena, President of the Democratic Socialist Republic of Sri Lanka, on celebrating 60 years of relations with Thailand, boosting bilateral trade, and potential opportunities with the AEC.
read articleFocus: Special Economic Zones
Zone Home
With numerous upcoming major trade deals like the TPP and CAFTA, in addition to Thailand joining the ASEAN Economic Community, the country is developing a host of strategically located and incentivized SEZs to take advantage of the upcoming opportunities.
read articleFocus: Auto Sector
Driving Force
A combination of slower global economic growth and weaker domestic purchasing power suggests that Thailand's renowned automotive sector is heading for flat growth in 2016, thereby encouraging the government to promote cutting-edge innovation across the industry.
read articleFocus: Gems & Precious Stones
Shine Bright
As a key driver of the economy, Thailand's vast manufacturing sector comes in different shapes and sizes—and colors, for that matter. One segment to have really emerged as a sparkling export opportunity over the past two decades has been the country's gems and precious stones industry.
read articleInterview
Dr. Pichet Durongkaveroj, Minister, Science and Technology
TBY talks to Dr. Pichet Durongkaveroj, Minister of Science and Technology, on the initiatives to boost innovation in the country, facilitating greater private investment, and fostering mutually beneficial partnerships with countries.
read articleFocus: E-Commerce
Down the Wire
In 2014, when Chinese e-commerce giant Alibaba made headlines for listing the largest global IPO in history (USD25 billion), many had come to recognize that the industry, which was typically dominated by Silicon Valley heavyweights, was gravitating drastically eastward.
read articleInterview
Anantachai Kunanantakul, Chairman & CEO, Siam Eastern Industrial Park (SEP)
TBY talks to Anantachai Kunanantakul, Chairman & CEO of Siam Eastern Industrial Park (SEP), on the development of the park, the benefits on offer, and plans to further develop the country's eastern seaboard.
read articleInterview
Kan Trakulhoon, Head of Working Group , Eastern Economic Corridor (EEC)
TBY talks to Kan Trakulhoon, Head of Working Group of the Eastern Economic Corridor (EEC), on the background of the EEC project, the government's push to build up infrastructure in the country, and his projections for the coming year.
read articleFocus: Water Shortage
A Drop At a Time
In 2016, many Thai's across the Kingdom will be looking out for weather forecasts—rather than economic ones—as the key indicator for the country's economic sustainability. Water is becoming an increasingly precious global commodity as populations and temperatures increase.
read articleReview: Education
Many Brains to Gain
Thailand has long suffered from an ineffective education system, with a large number of dropouts and graduates not equipped to deal with the demands of the 21st century. However, the government has been taking actions in a bid to get serious about much-needed education reform.
read articleInterview
Weerasak Kowsura, Board Chairman, Thailand Convention & Exhibition Bureau (TCEB)
TBY talks to Weerasak Kowsura, Board Chairman of the Thailand Convention & Exhibition Bureau (TCEB) & Board Chairman of Designated Areas for Sustainable Tourism Administration (DASTA), on the country's booming MICE industry and the benefits of community-based tourism.
read articleInterview
Proudputh Liptapanlop , Executive Director, Proud Real Estate
TBY talks to Proudputh Liptapanlop and Pasu Liptapanlop, Executive Directors of Proud Real Estate, on the company's development plans for Hua Hin, the prospects of the industry, and their expectations for the future.
read article