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Wednesday, June 19, 2024

LiB Consulting Shares Insights on Future Trends of the Automotive Industry for Thai Businesses

Leading business consulting firm, LiB Consulting, has revealed the top trends Thai automotive businesses should be aware of to cope with the changes introduced by the emergence of Battery Electric Vehicles (BEVs)

Thailand is one of the leaders in parts manufacturing for internal combustion engine (ICE) vehicles in ASEAN. However, the emergence of BEVs is shaking the foundation of the leadership, presenting challenges to maintaining its position by following the changing consumer trends in the automotive market.

Various factors are fabricating the changes in future automotive trends, and businesses and stakeholders in the Thai automotive industries should monitor those factors closely. The changing direction of the Thai automotive industry indicates a surge in the BEV market, thus significantly impacting the Thai automotive parts manufacturing industry.

LiB Consulting has introduced five possible scenarios which can occur in the Thai automotive industry by 2030:

  1. Lower vehicle production
  • As the world’s focus on BEVs increases, Thailand will face a contrary situation because it is not a manufacturing base for BEVs.
  • The lack of balance between manufacturing capabilities and consumer demand could reduce car production for exports due to the lower ICE demand from overseas.
  1. Thailand will become a major ICE manufacturing hub
  • While the BEV trend continues, global demand for ICE and hybrid vehicles will persist due to insufficient BEV infrastructure.
  • Thailand will still maintain its position as an ICE hub. However, Thai businesses should acknowledge that exports may decline due to lower global demands.
  1. Thailand will mainly manufacture BEVs for domestic use with low exports
  • Thailand will become a parts manufacturing hub specifically for domestic BEVs, but the country will see a steep decline in exports as carmakers shift their export hubs to Indonesia, Vietnam, or China to benefit from lower wages and battery materials.
  • Thailand will lose 40-50% of the current automotive manufacturing market shares.
  1. Thailand will become a hub for BEV assembly and export
  • Based on the current EV consumer trend in Thailand, the country will see an opportunity to serve as a BEV parts manufacturing base for existing carmakers for domestic use and exports.
  • Most BEV parts will likely be manufactured in Thailand, except for the parts it lacks resources, such as batteries.
  • Nevertheless, batteries may be imported for assembly if Thailand sees higher BEV demands. New players may choose Thailand as an assembly hub to benefit from lower tariff walls.
  1. Thailand will become a BEV manufacturing hub for exports to ASEAN
  • Western countries like the US, the UK, and China will invest significant sums in their BEV infrastructures.
  • There is a plan to set up a consortium similar to Airbus to develop and manufacture compatible batteries for BEVs.
  • On the other hand, Japan shows low interest in this approach.
  • Thailand can seize the opportunity to adapt to the situation with more investment and R&D for new BEV-related technologies from both old and new players.
  • In this way, it could be easy for Thailand to become a BEV manufacturing hub for ASEAN.

Whilst these scenarios are not an attempt to accurately predict the future, LiB Consulting’s goal is to map out the spectrum of possibilities and help Thai businesses prepare for possible opportunities or threats. LiB Consulting has also invited two leading figures from the Electric Vehicle Association of Thailand (EVAT) and the Thai Auto-Parts Manufacturers Association (TAPMA) to share their insights on the future trends.

Mr Kritsada Uttamote, President of the Thai Electric Vehicle Association, said, “At present, both the government and private sectors aim to promote Thailand to be an EV hub in the future to drive the economy and create jobs in the country. If the government can achieve the goals of promoting EV growth and usage, there is a high chance that Thailand will achieve its BEV regional hub status.

EV support measures should prioritise the EV ecosystem by promoting the growth in EV charging station investments and supporting workforce development for the autonomous, connected, electric, and shared vehicles (ACES) trend. The government can cooperate with domestic and overseas private sectors and research institutions to manage the clean energy transformation to achieve Net Zero, which is gradually becoming a significant factor in the business sector.

Technological transformation can allow new businesses to build their value chain amidst the changing global trends. However, Thai parts manufacturers are still highly concerned about the impact of BEV transition on the existing supply chain.”

Mr Sompol Tanadumrongsak, President of the Thai Auto-Parts Manufacturers Association, commented, “At present, Japanese companies hold more than 70% market share in the Thai automotive market. I think Thailand can still maintain the ICE manufacturing leadership that has been our strongest advantage for 50 years while simultaneously attracting new players from China.

The changes will gradually take place, and Thai businesses should adapt to the emergence of BEVs by acquiring new technologies to improve existing manufacturing processes. Many countries with prominent ICE manufacturing foundations face similar challenges and seek the best action to welcome the emerging BEV trend. It is undeniable that the markets are seeing soaring demands for BEVs, but the demand for ICE will persist as well.”

The emergence of BEVs can provide opportunities for Thailand to develop its efficiency in travelling and travelling-related services due to higher domestic BEV demand. However, this poses some risk factors that may hinder the country from achieving its goals. If existing players are too hesitant to launch BEV manufacturing and lose market shares, Thailand’s BEV manufacturing industry will fail to generate high added value.

The best course of action for this challenge is to take the Two-Leg Strategy approach. Thai businesses should preserve the advantages of the Thai automotive industry and develop new potential, learn new things, and adapt to the trends simultaneously to satisfy the future supply chain.

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