Global markets beckon

The joint staging of the “Thai Auto: 2 Million Cars Production Milestone” gala event on November 30 by the government and private sectors portrayed the road to success of the Thai automobile industry during the past 50 years, as well as identifying the next steps for the sector onto the global stage.

The private sector was represented at the event by the Automotive Industry Club, the Federation of Thai Industries, the Thai Automotive Institute and auto-parts groups.

Apart from video and cut-out presentations, the organisers handed out a souvenir booklet containing an analysis of the opportunities and challenges for the Thai auto industry at the global level.

The report said that during the past several years, the global auto industry had faced numerous challenges.

They include the effects of the world economic crisis, environmental protection and fluctuations in energy prices that affect the development of future automotive technology. 

Alternative-fuel vehicles are expected to help fill in and substitute automobiles that run on fossil fuel, as well as solve environmental issues.

There are also the challenges of trade and investment, whether at the bilateral or multilateral level. These factors all play a part in shaping the global auto industry, and serve as both opportunities and obstacles for the development of Thailand’s auto industry on the world stage.

 

Challenges from the global economic crisis

The 2008 economic crisis that originated in the United States caused a 6-per-cent slowdown in global auto sales. It took until 2011 for the industry to recover and register growth of 14 per cent with total sales of 69 million units.

Along with the change in the ratio of production and sales among major auto-producing countries, there was also an exodus of funds from the US and Europe towards Asia. It also caused the rise of emerging markets such as China, Brazil, India and Russia.

Last year, there was also the onset of a financial crisis in Europe, which ignited from the slump in weaker euro-zone countries such as Greece. This spread to many countries, including Spain, putting a halt to European economic growth.

The US and European financial crises resulted in relocation of investments to Asia, and also affected exports of Thai automobiles to those markets. While Thai auto-makers had to find new markets, the challenge is that the investments are coming this way.

 

Challenges from environmental protection, energy price fluctuations

Data from the International Energy Agency show that alternative-energy fuels that are used today, such as natural gas and ethanol, will play a major role due to demand until 2025. Meanwhile, demand for plug-in hybrid electric vehicles (PHEVs) will grow in 2020 while the market for electric vehicles will start to expand in 2025.

In addition, future technology for automobiles will focus on lowering carbon-dioxide emissions. The goal is to reduce CO2 emissions from automobiles by 50 per cent from the 2005 level by 2025.

This shows a trend of increasing demand for alternative-energy vehicles, such as PHEVs and electric vehicles.

The foundation in developing these environmentally friendly technologies needs to be prepared quickly, according to the analysis. In particular, there is the need for research and development of automotive technology for auto- and parts-makers in the country, as well as preparing infrastructure such as charging stations for electric vehicles.

Apart from the favourable trend for alternative-energy vehicles, vehicles with internal combustion engines will also receive ongoing development to improve fuel economy and performance by means of weight reduction through alternative materials, improving engine efficiency and enhancing performance with high-level technology.

 

Challenges from trade and investment pacts

The government has continuously built a framework and promoted free trade since becoming a member of the World Trade Organisation.

The eight major FTAs that the Kingdom adheres to are: the Asean Free Trade Area, the Asean-China Free Trade Agreement, the Thailand-Australia Free Trade Agreement, the Japan-Thailand Economic Partnership Agreement, the Thailand-India Free Trade Agreement, the Asean-Korea Free Trade Agreement, the Asean-India Free Trade Agreement, and the Asean-Australia-New Zealand Free Trade Agreement.

Due to these pacts, the Thai auto industry must face the challenges from global competition, especially from the elimination of the import duties along with the Asean Economic Community, which will be implemented in 2015. The AEC will open up Asean members’ markets in five areas – products, services, investment, skilled labour and capital.

In order to compete, domestic auto assemblers and parts-makers need to speed up development in terms of marketing and human resources, as well as raising the technological standard of products and manufacturing processes, said the analysis. Due to these challenges, the Thai auto industry must adapt to the global supply chain, which requires not only it being a manufacturing base, but also pursuing research and development in order to catch up with the latest automotive technologies. At the same time, it needs to focus on energy conservation, eco-friendliness and safety.

Finally, the AEC presents both pros and cons, the analysis said. While the regional market size is being expanded significantly, there are obstacles such as pollution and safety standards, cannibalism among member Asean nations in attracting foreign investment, as well as competing against the same products in the same markets.