Thai automotive parts industry needs more govt support, says FTI

The automotive industry is in a downturn. In the first five months of 2024, 644,951 vehicles were produced, a 16.88% decrease compared to the same period last year. The primary reasons for this decline are the drop in domestic sales due to a sluggish economy and the problem of rejected car loans, which is a significant factor affecting sales since 80% of car purchases in Thailand are made through financing.

The decrease in car production has affected the supply chain, particularly at the tier-2 level and below.

Previously, parts manufacturers were concerned about entering the electric vehicle (EV) industry, feeling that this would impact their businesses because EVs have fewer parts than internal combustion engine vehicles.
Auto parts entrepreneurs have proposed that the government prepare for the transition. Various agencies, including the Ministry of Industry, have plans in place, but the implementation has not yet enabled most auto parts manufacturers to be ready for technological transitions.

Suphot Sukphisarn, secretary-general of the Cluster of FTI Future Mobility-ONE and chairman of the Automotive Parts and Accessories Industry Group of the Federation of Thai Industries (FTI), stressed that the Thai automotive parts industry needs support during this technological transition in terms of cost, skills, and technology to sustain businesses and employment.

Furthermore, there is a need to upgrade production and develop products to meet the demands of the future automotive industry. Even for businesses that cannot continue in the automotive sector, there is still potential for development, he noted.

The government should play a far greater role in promoting the transition by encouraging the use of domestic products and supporting policies to facilitate manufacturers in entering the supply chain of other industries through public or private procurement.

The Thai automotive parts industry has been operating for 50 years, adopting technology from Japan. Its strength lies in mechanical skills. As the industry enters a new era, there is a need to identify which industries can leverage these skills and create products for the new target industries (New S-Curve) over the next 10 years.

The proposed sectors include:

Medical device manufacturing: This industry is closely related to automotive parts manufacturing, not least because of the level of precision required. Some auto parts manufacturers have already diversified into the medical device sector, producing products with lower medical risks. The government should support this transition by promoting the use of domestic products and facilitating entry into the supply chain of other industries.

Robotics: The robotics sector is similar to the automotive industry in that it requires setting up factories in Thailand to serve as a supply chain. However, the challenge for Thai robotics is gaining trust and market acceptance, as local products often struggle to compete with international ones.

Aerospace parts: Before the Covid-19 pandemic, the aerospace sector received positive feedback. The government invested in the Eastern Economic Corridor (EEC) to establish an aviation industrial estate and attract aircraft for maintenance. Despite the presence of over 20 aerospace parts companies in Thailand, the challenge remains that local parts are not widely used due to the high standards required by companies like Boeing and Airbus. The FTI is working to initiate support projects to integrate into the aerospace supply chain.

Rail system parts: The government's policy for high-speed rail and dual-track railways offers opportunities for local manufacturers to design and produce high-quality components like seats, handrails, luggage racks, lighting, and air conditioning. With government support and adherence to standards, Thai manufacturers can meet the requirements for rail system parts.

Aftermarket parts: This sector includes spare parts such as shock absorbers, brake pads, wiper blades, and filters for the global market, which has around 2 billion vehicles.

Transitioning to EV production is not immediately feasible for Thai manufacturers without government support, unlike in Taiwan, where government backing has enabled global sales.

“We have proposed this issue to the Industry Ministry’s Office of Industrial Economics for the past four years and will continue to push for industry support. It is crucial to find supporting industries, especially considering that June is typically the peak production month for cars, yet production has continued to decline. This is a concerning trend, exacerbated by household debt issues,” Suphot added.