Founded over 50 years ago, Thailand’s automotive sector has developed into the biggest automotive hub in Southeast Asia and one in every of the biggest on the earth. In 2016, Thailand was the world’s thirteenth largest automotive manufacturer. The country offers the twin advantage of a giant domestic market in addition to a longtime cluster of automotive component suppliers.
The industry accounts for nearly 12 percent of Thailand’s GDP and employs greater than 500,000 people, including original equipment manufacturers (OEMs) and first-, second-, and third-tier suppliers. Japanese OEMs have 85 percent of the market, while American OEMs account for the remaining 15 percent.
Latest automotive regulations
In 2016, the federal government introduced recent excise taxes based on carbon dioxide emissions, E85 compatibility, and fuel efficiency as a substitute of engine capability. The hardest hit segments were SUVs and pick-ups. The industry saw sales growth within the second half of 2015 as consumers grappled with recent excise taxes from 2016 onwards.
The government also supports the production of green cars by providing incentives to manufacturers, akin to income tax exemption for a specified period, excise tax incentives, and other tax incentives. Similar to green cars, the federal government also sees opportunities for electric vehicles (EVs). To promote the production of electrical vehicles, in 2016, the Investment Board of Thailand decided to eliminate import duties on battery electric vehicles and supply incentives for the production of battery electric vehicles (BEVs).
Automotive cluster
Thailand’s automotive cluster includes 700 Tier 1 firms and 1,700 Tier 2 and three firms, employing almost 80 percent of the entire automotive workforce. Parts and components manufactured in Thailand, recognized for his or her top quality by global OEMs, account for nearly 85 percent of the entire variety of parts assembled within the country. Almost 75 percent of the country’s automotive exports are auto parts, followed by engines and spare parts. More than 50 of the world’s top 100 OEM suppliers have manufacturing bases within the country.
Future prospects
2016 saw a decline in production and exports, while domestic sales rose year-on-year. Domestic sales are expected to grow by 6.7 percent in 2017. However, exports aren’t expected to extend because of depressed oil prices and global economic conditions. Record household debt, lower purchasing power, and a tightening of the loan approval process will are inclined to weigh on the domestic recovery in 2017.
The government’s First Car Buyer Program, introduced in 2011, provided a tax break for first-time buyers, which led to a sales increase in 2012 and a subsequent decline in 2013. The program didn’t allow transfers of ownership of such vehicles for five years. Buyers who took advantage of this system can now transfer ownership. Most current automobile owners are also considering buying newer and more efficient models powered by the carbon dioxide excise tax introduced in 2016. OEMs estimate that 300,000 buyers from the federal government’s First Car Buyer Program will buy recent cars annually. Anticipating a rise in demand, most Japanese automobile firms are also introducing newer and more fuel-efficient models in 2017 to draw recent buyers.
The latest carbon dioxide-based excise duty reflects the federal government’s initiative to maneuver towards more environmentally friendly cars within the near future. Eco-friendly cars that emit less greenhouse gases than conventional petrol cars accounted for 39.8 percent of the market in 2016, up from 35.7 percent in 2015. The government will need to supply incentives for consumers to change to electric vehicles and develop supporting infrastructure, akin to charging stations, to advertise electric vehicles.
Thailand will proceed to be a producing hub in Southeast Asia within the near future, nevertheless it must shift to R&D to attain sustainable growth. Focusing on technologies akin to EVs, eco-cars, and hybrids will allow Thailand to satisfy the needs of export markets which can be slowly phasing out combustion engines over the following 15 to twenty years.
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