Thailand vehicle production to decline between 25-30 per cent in 2020 – GlobalData

Following the news that the Federation of Thai Industries (FTI) reported a year-on-year decline of 38.76 per cent in vehicle production over the past nine months, Bakar Sadik Agwan, Senior Automotive Consulting Analyst at data and analytics company GlobalData, says: “Thailand, a key automotive production hub in Asia, is struggling hard to recover from the slumped vehicle production output. Vehicle production, both for domestic sales and exports, has been witnessing a downward trend since 2019.

“The global economic slowdown shut down of some local production facilities, weak domestic demand and US-China trade war led to decrease in production, and later the COVID-19 worsened the production output with limited local demand and major supply chain disruptions. The latest statistics from FTI reveals a 38.7 per cent decline in production in the first nine months of 2020, when compared to same period previous year. The significant decline in production output raises eyebrows over the future of the Thailand automotive sector, which aims to emerge as a leading production hub in the Asia region.

“Though Thailand’s vehicle production and sales have been recovering month-on-month, the existing big-gap in year-on-year volumes raises major concerns over recovery to pre-COVID-19 levels. The total vehicle production in January-September 2020 period stood at 963,066 units; a year-on-year 38.76 per cent decline. Weak overseas demand due to the impact of COVID-19 has been the prime reason. On month-on-month basis, the production for domestic sales increased by 5.41 per cent while exports declined by 25.41 per cent in September 2020. Cumulative January-September 2020 production for both domestic sales and exports declines at 40.13 per cent and 37.49 per cent, respectively, from the previous year.

“The Thai auto sector needs government support to stimulate the domestic demand and production output. The government and OEMs are trying to shore up domestic demand with tax breaks and new vehicle launches. A possible scrappage policy is also on the cards, and can be implemented soon, which in turn will support domestic production. The government needs to attract more investments from global OEMs to establish their facilities in the country for exports. Thailand can also grab export opportunities in ASEAN markets, including Indonesia and the Philippines, where some key OEMs have recently shut their plants and in Vietnam, where the government eased import restrictions. However, in the near-term, recovery to pre-COVID-19 level, which was 2.01 million units produced in 2019, will remain a key challenge for Thailand. GlobalData expects Thailand vehicle production to decline between 25-30 per cent year-on-year in 2020.”