By Kathryn Gerardino-Elagio
Thailand is more than a favorite tourist destination. It has developed from an assembler of auto components into a top automotive manufacturing and export hub for over 50 years. Currently, Thailand is offering great opportunities for investments and incentives to local companies that make it worth taking a closer look.
In a panel interview during Ringier Trade Media’s recent ASEAN Smart Factory Summit 2020-Auto Parts Manufacturing Industry, Ms. Sonklin Ploymee, Executive Director, Industrial Linkage Development Division, Thailand Board of Investment (BOI), explained what the government is doing to support Thai OEMs (Original Equipment Manufacturers).
Sonklin said that Thailand's automotive industry produces various vehicles, as well as supporting industries making the country the top ten global vehicle production with majority of export.
“On a regional level, Thailand is a potential hub of Asia, the largest car manufacturer and possesses the strongest automotive cluster in South East Asia,” she added.
Ms. Sonklin Ploymee
Challenges faced by automotive OEMs in Thailand
The last few years have been good to the automotive industry. But following the current technology disruption, the global order for energy and environment, the world economic turmoil, the trade war between US and China, the Covid-19 pandemic, the competition from new automotive entrants in the region, such as Indonesia and Vietnam, as well as the halt of car imports from Thailand by some countries, the Thai automotive industry is witnessing an enormous decrease in sales.
According to Sonklin, Thailand could lose its automotive core competency unless policymakers adapt to industry upgrades to sustain its competitiveness and meet global demand.
One of Thailand BOI’s strategy is the promotion of electric vehicles (EVs). However, it is still in the initial stage and has a long way to go. “The EV trend is a game-changer, and with this Thai part makers will have to continue their sustainability in a year to come. Thus, Thailand's automotive industry may weaken because of the widespread trends in the EV industry,” she stressed.
Government measures to support Thai automotive OEMs
The automotive industry is shrinking all over the world during this pandemic. Sonklin justified, “Nobody goes out, and people stopped moving from one place to another. Also, there is the shutdown of production; and when there is production shutdown, the supply chain is also experiencing problems. All of these problems caused by COVID-19 are being experienced by countries globally, not just Thailand. Hence, the government is implementing three different measures to help OEMs in Thailand.”
She stated, “The first measure is financial support. The government particularly supports local small and medium enterprises (SMEs). They are supported thru low interest rates, extensions of payment and so on. With this financial benefit, the government is helping many Thai OEMs lessen their debt burdens and to move forward.”
Sonklin detailed the second as the market. “Now that COVID-19 has already been managed and controlled in Thailand, she said that production facilities are starting to operate. “So when production is back, you have to increase the demand. How do we help OEMs access the market? Right now, we have forego the overseas market and focus on the local market since we believe that this is more important. The government is doing various activities to link local markers with suppliers. We help them build a network and discuss about sourcing,” Sonklin shared.
Sonklin further shared the third measure as sourcing. “Besides the market, we also think of how to help OEMs to be ready for sourcing in the future. When COVID-19 impacted the production, we recognise that the supply chain is also experiencing problems. There was a halt and shutdown in the supply chain, and many makers believe that they should rely on the local supply chain. To be ready, Thai OEMs should be prepared for the new sourcing method. The government is helping OEMs improve their productivity by giving more incentives when purchasing new machinery and other assistance,” she revealed.
EV supply chain
There are about thirty companies applying for investment promotion in the EV industry in Thailand, however most of them are foreign players. Sonklin explained the extent Thai companies joining the EV supply chain.
“A lot of people are asking us why BOI is only helping foreign companies to invest in Thailand. What about local companies? BOI along with other government agencies are promoting the EV industry,” she disclosed.
Although many companies are applying to get the promotion and set up their production plants in the country, the Thai government is also assisting local companies.
“A number of local companies are doing research & design (R&D) with the government to produce EV buses. So I think this should be one of the potential opportunities for Thai companies to join the EV industry. Also, there is an EV association in Thailand, and many Thai enterprises are taking part of it,” Sonklin divulged.
She also mentioned that another field to consider is charging station. “There is a big Thai company who is playing an important role in this field,” Sonklin said.
Future cooperation in ASEAN to support automotive OEMs in the region
As the world grapples with the extent of the damage being caused by the ravaging pandemic storm, Thailand aims to have an exchange of auto parts between ASEAN countries.
“So let’s say Indonesia has the potential to produce electronic parts and Thailand car body parts, while Philippines is identified for its plastic parts, we can trade parts but with lower import duty. This can help lower production cost,” she reasoned.
Sonklin made clear that the exchange can create a center for sourcing auto parts in ASEAN countries, and become a global destination for sourcing too.
“With this we can also build our supporting database for ASEAN. Here in Thailand BOI, we used to cooperate to build the database of supporting in the automotive industry in ASEAN, and now it’s time to update that supporting industry database. So I think this is all that we should do to make ASEAN become a global sourcing destination for automotive parts,” she rationalised.
“ASEAN is one of the important regions in the world. Cooperation is the best and we can do it,” Sonklin beamed.
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