Thailand Automakers Battle Market Shift, Face Production Crisis
Thailand’s automotive sector, a cornerstone of the nation’s manufacturing prowess, is grappling with a persistent downturn, raising concerns about its future global standing. While Nissan Motor Thailand’s continued investment offers a glimmer of hope, the industry faces significant challenges, including tightening loan criteria, soaring household debt, and the global shift towards electric vehicles (EVs).
The Federation of Thai Industries (FTI) presents a stark picture. Thailand, ranked 10th globally and 5th in Asia for vehicle production in 2023, is struggling to maintain its position. Automotive manufacturing plummeted 19.9% year-on-year in 2023, reaching 1.46 million units. This decline is primarily attributed to a significant drop in domestic sales, fueled by stricter loan approvals amid high household debt.
This downturn continues a trend. Production has steadily decreased since 2022, when the industry produced 1.88 million units. While the Russia-Ukraine war exacerbated the global semiconductor shortage in 2022, tighter lending criteria from banks and financing companies significantly contributed to the subsequent decline. This cautious approach, driven by concerns over non-performing loans (NPLs), persisted throughout 2024, forcing the FTI’s Automotive Industry Club to repeatedly downgrade its production targets. Even with these adjustments, the industry fell short, producing only 1.46 million vehicles—considerably less than the initial target of 1.9 million.
The sluggish domestic market further complicates the situation. Sales across almost all segments, including premium cars, suffered in 2024. Total domestic vehicle sales reached a 14-year low, dropping 26.1% to 572,675 units. This decline reflects the nation’s high household debt-to-GDP ratio, which hovered around 89% in the third quarter of 2024. Even luxury carmakers, such as Mercedes-Benz and BMW, experienced significant sales declines.
This slumping domestic demand has impacted Thailand’s regional standing. In the first quarter of 2024, Malaysia surpassed Thailand as the second-largest automotive market in Southeast Asia, behind only Indonesia. While Malaysia experienced growth, Thailand saw a sharp sales decline.
Despite these challenges, industry leaders remain optimistic. Rene Gerhard, President and CEO of BMW Group Thailand, believes Thailand retains its strength as a key production base for internal combustion engine (ICE) vehicles and possesses strong potential for growth in the EV sector. This optimism is further fueled by government initiatives like the EV3.0 scheme, which provides subsidies for EVs and electric motorcycles, stimulating both production and sales.
To revitalize the industry, tax incentives, particularly excise tax reductions for hybrid electric vehicles (HEVs), are under consideration. This measure aims to bolster domestic automakers, particularly Japanese companies specializing in ICE vehicles, against increasing competition from Chinese EV manufacturers. This strategy, combined with the government’s «You Fight, We Help» debt relief scheme, could potentially alleviate household debt burdens and stimulate auto loan approvals.
Further proposals include a 5-billion-baht fund to boost consumer auto loans, particularly for pickup trucks—a crucial segment for small entrepreneurs and the auto parts industry. This echoes the government’s response to the 2011 floods, which devastated the automotive sector. The subsequent «first car» scheme successfully revived production and sales, highlighting the potential impact of government intervention.
The future of Thailand’s automotive industry remains uncertain. While challenges persist, a combination of government support, technological adaptation, and evolving consumer preferences will determine whether the nation can regain its footing and reclaim its position as a global automotive powerhouse. The industry is at a crucial juncture, and its response to these challenges will shape its future for years to come.
