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    Home » Thailand’s Auto Industry Struggles with Debt and EV Competition

    Thailand’s Auto Industry Struggles with Debt and EV Competition

    Kanika SharmaBy Kanika SharmaSeptember 25, 2024 Industry News No Comments3 Mins Read
    Thailand's Auto Industry

    Thailand’s Auto Industry Faces Decline Amid Rising Debt and EV Shift

    Thailand’s auto industry worth $53 billion, is confronting severe challenges. With domestic consumers struggling to finance purchases and global buyers increasingly opting for electric vehicles (EVs), the sector is in crisis. Output and jobs have already been cut, prompting government efforts to reverse the decline.

    Impact on Local Manufacturers

    The downturn is affecting companies such as Techno-Metal, which produces cast iron parts for major brands like Toyota and Mitsubishi. Its production has dropped to just 40% of peak capacity, while its workforce has shrunk from 1,200 to 900. Reduced working hours and the elimination of overtime are now the norm.

    Overall production in Thailand’s auto industry has been falling for the past year. August 2024 saw a 20.6% year-on-year decline. Domestic sales also hit their lowest level in 14 years, with the industry expecting to produce 1.7 million vehicles this year, down from 1.9 million in 2023.

    Struggles in the Pick-Up Truck Market

    The backbone of Thailand’s auto sector, the pick-up truck market, is suffering the most. Pick-ups accounted for nearly half of all vehicle sales in the country in 2023. However, exports of pick-up trucks have dropped by 8.76% this year, with production down 20.51% to 616,549 units.

    This decline in the pick-up truck segment is a major blow, as over 90% of pick-up parts are made locally. This sector forms 70% of Thailand’s domestic auto parts market. The total sales of auto parts are projected to fall nearly 12% this year, amounting to 519 billion baht ($15.68 billion).

    Financial Struggles and Efforts to Revive the Industry

    The decline in sales is largely driven by Thailand’s high household debt, which stood at $484 billion (90.8% of the GDP) in March 2024. This heavy debt burden has severely limited consumers’ ability to buy new cars, especially pick-ups. Financial institutions approved far fewer pick-up loans in the first half of 2024 compared to 2019. Additionally, many existing car owners are struggling with non-performing loans (NPLs), which have risen by 40% in the past year.

    To address the crisis, the government is considering incentives to attract foreign manufacturers of traditional internal combustion engine (ICE) and hybrid vehicles. By focusing on hybrid production, Thailand hopes to keep its position in the pick-up truck market.

    However, challenges remain, especially in the EV market. Although the country has seen investments from Chinese EV makers, local firms are struggling to compete due to higher costs and lower profitability.

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    • Kanika Sharma
      Kanika Sharma

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