Thailand Auto Parts Makers Diversify Amid US Tariff Threats
Thai auto parts manufacturers are navigating turbulent times, facing both a sluggish domestic market and the threat of new US trade tariffs. The Federation of Thai Industries (FTI) confirms that these businesses are actively exploring new export markets due to concerns over President Donald Trump’s recently announced tariff policy. This adds complexity to an industry already struggling with domestic economic headwinds.
On February 27, President Trump announced plans to impose a 25% tariff on imports from Canada and Mexico, effective March 4. China also faced an additional 10% levy from the same date. Reports indicate the rationale stems from President Trump’s assertion that these countries inadequately addressed the flow of illicit drugs into the United States. While seemingly unrelated to Thailand, these tariffs have caused concern within the Thai auto parts sector.
Suphot Sukphisarn, Secretary of the FTI’s Cluster of Future Mobility-ONE (CFM-ONE), explained the indirect impact. Many Thai manufacturers supply parts to Japanese car companies operating in Mexico. Therefore, tariffs on Mexican imports could indirectly reduce demand for Thai components. This indirect exposure creates uncertainty and highlights the interconnectedness of global trade. Furthermore, Mr. Sukphisarn expressed concern that Thailand might face direct US tariffs due to its significant trade surplus with the United States. This surplus reached $35 billion in 2024, making Thailand a potential target in the ongoing trade tensions. The US remains Thailand’s largest export market, accounting for 18.3% of total shipments, or $54.9 billion, emphasizing the importance of this trade relationship.
Beyond international trade concerns, the Thai auto parts industry is grappling with a prolonged domestic slowdown. Years of stricter auto loan criteria, implemented by banks and financing companies in response to high household debt and weakened consumer purchasing power, have suppressed demand. CFM-ONE’s projections are bleak, suggesting a full market recovery is 3–5 years away. This prolonged slump raises concerns about job security within the industry, which employs 700,000 people. Some manufacturers have already reduced working days and implemented wage cuts, illustrating the economic strain.
Mr. Suphot highlighted the pickup truck segment, a key market for auto parts, as particularly hard hit. Loan rejections, especially in the Northeast and central regions of Thailand, have decreased sales and worsened the industry’s situation.
To diversify and stimulate growth, the FTI encourages auto parts manufacturers to shift towards producing components for Chinese electric vehicle (EV) manufacturers. However, this transition presents challenges. Ampol Hompleum, Secretary-General of the FTI’s Auto Parts Industry Club, acknowledges that adapting production from internal combustion engine technology to EV components will require significant adjustments, potentially taking months or years. The FTI estimates a 1–2 year timeframe for manufacturers to develop the specialized parts needed for EVs. This transition is a significant undertaking but offers a potential lifeline, providing a path to navigate current challenges and capitalize on the burgeoning global EV market. The coming months will be crucial for the Thai auto parts sector as it seeks to overcome current difficulties and build a more stable and prosperous future.
