Auto industry set to drive down road to recovery

The country’s ailing auto industry is expected to take the path to recovery thanks to a return to political stability and the dying effects of the highly popular First Car Buyer programme, Industry Minister Chakramon Phasukavanich said. 

Speaking at “CEO Talk 2015” organised by the Thai Automotive Journalists Association recently, Chakramon said Thailand has a total auto production capacity of 2.8 million vehicles, but the market slump has prevented production from meeting that figure. 

“This has affected Thailand’s industrial GDP, which has declined, as the automobile industry makes up 10 per cent of all industries in the country,” he added. 

Auto production is expected to finish the year at just 1.95 million vehicles, down 25 per cent compared to the previous year, although auto exports of 1.1 million vehicles are helpful, he said. 

“We believe the auto industry is returning to normal as Thailand returns to political stability, while the First Car Buyer programme and its effects have come to a complete end,” Chakramon explained. 

The populist First Car scheme, introduced by the Yingkuck Shinawatra government, has been accused of stealing future demand while costing the government tens of billions of baht in unnecessary excise duty as rebates of up to Bt100,000 were offered to qualified buyers. 

Chakramon said the new excise tax structure for automobiles, which will take effect on January 1, 2016, will boost the kingdom’s auto industry. 

“It will benefit the industry and the country because it will help promote development of new vehicles that conform to new tax requirements based on carbon dioxide emissions, higher fuel efficiency and alternative fuel capabilities, in addition to higher safety standards,” he said. 

According to Chakramon, the Industry Ministry is preparing an auto database similar to that in developed countries in order to inform consumers about necessary information such as fuel economy and emission levels. 

“The Thai auto industry still faces many challenges from global competition, so we need to speed up the development of the industry as well as find additional models to help us expand the market in the future. They have to be superior to Eco-Car Phase 2 vehicles,” he said. 

The Board of Investment has approved the participation of nine automakers in the Eco-Car Phase 2 project, while Volkswagen has yet to submit details for approval. 

“The car that will become the new champion product could be a hybrid or electric vehicle,” he believed. 

Ong-art Pongkijvorasin, chaiman of the Automotive Industry Group, Federation of Thai Industries, said competition within the Asean region is becoming stronger as member countries develop their own auto industries. 

“Indonesia has set a production target of 1.6 million vehicles next year and as many as 4.2 million vehicles by 2025. Meanwhile, Malaysia has announced that there will be no promotion for its national car, and support will be provided for the development of electric vehicles. Malaysian auto production is expected to reach 1.25 million vehicles by 2020. Even a small country like Cambodia has welcomed investment from China for production of trucks. That’s why Thailand needs to speed up its auto development and try to find ways to expand the market in the CLMV countries [Cambodia, Vietnam, Myanmar and Laos] after the AEC [Asean Economic Community] comes into being,” he said. 

Ong-art also said Thailand should make use of its strength in the auto parts sector, turning the country into a global manufacturing base for high-quality auto parts. 

“In addition, we should develop other areas such as product testing and [strengthen] basic infrastructure such as sea ports, logistics as well as research and development, which is still lacking in this country,” he said. 

Toyota Motor Thailand executive vice president Wichien Emprasertsuk predicted that Thailand’s auto market would finish the year below 900,000 vehicles, down from 1.3 million last year. 

“[But] this is acceptable, considering the high growth achieved during the past 4-5 years, minus the distorted market stimulation,” he said. “Next year the market could experience growth, and in the future we could reach annual sales of 1.5 million vehicles per year.” 

Wichien warned that the industry needs to look for channels for growth by raising its competitiveness, after moves by other Asean nations to raise their competitiveness. 

“One thing that will happen after the AEC [takes effect] is that apart from the growth expected along the border and increased purchasing power in provincial areas, neighbouring markets will play a bigger role. Thailand should go in and create more opportunities within the Mekhong basin countries,” he said. 

“Indonesia is trying to compete against Thailand and their advantage is a population of more than 200 million. But if Thailand joins hands with countries like Laos, Vietnam, Cambodia and Myanmar, we will collectively have as much population. These countries are experiencing strong economic growth and growing automobile markets,” he pointed out. 

Nissan Motor Thailand senior vice president Praphat Choeychom said the AEC would usher in the “start of changes”, and Nissan has been watching the situation for many years. 

He said Nissan expects the development of new markets such as Myanmar, but there are many limitations such as its small market size and left-hand-drive system. This is why Nissan decided to invest more than Bt10 billion in a second assembly plant in Thailand for use as a production and export base to neighbouring countries. 

“Investing in neighbouring countries requires the right timing, and presently Thailand is a better choice. But the AEC also has benefits, as we could start using a foreign workforce to help solve the labour shortage in Thailand or high labour costs,” Praphat explained. 

Mazda Sales Thailand vice president Sureethip La-Ongthong Chomthongdee said the automobile industry has three roads ahead – clean diesel that is highly popular in many developed countries, hybrids that are now powerful as well as efficient, and electric vehicles, which are emission-free but still suffer from lack of infrastructure. 

“In terms of the direction for the auto industry, we can see that the agricultural sector is very important and in the future the upcountry market will expand dramatically,” she said.