Structural challenges and an ageing population threaten Thailand’s automotive sector as the industry eyes electric vehicle production to stay competitive.
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| Thailand’s auto industry faces declining production, demographic challenges, and shifts in consumer preferences, with a focus on transitioning to EV production. Image Courtesy: BP |
Bangkok — January 5, 2025:
The Bank of Thailand has expressed concerns about the growing challenges in the country’s automotive sector, particularly regarding the volatile outlook for new car sales, reports the Bangkok Post.
According to the Monetary Policy Committee’s (MPC) Q4 2024 report, Thailand’s uneven economic recovery continues to impact the automotive market. Pickup sales, a critical segment of the industry, are expected to recover more slowly than passenger cars due to weaker purchasing power among commercial vehicle buyers.
Passenger car sales, however, are projected to improve in 2024, driven by robust consumer purchasing power and a growing shift toward hybrid vehicles. Despite this optimism, the report highlights potential headwinds in the used car market. Slower growth in this segment could affect loan approvals, although sellers expect reduced price competition due to fewer seized vehicles being auctioned.
The MPC also identified structural challenges and demographic shifts as medium-term threats to the industry. An ageing population is expected to dampen demand for new vehicles, potentially leading to market saturation. Additionally, younger generations increasingly favor alternatives to traditional car ownership, such as public transport, ride-hailing services, and car rentals, further pressuring the sector.
To remain competitive, the report urges Thailand’s automotive industry to transform itself into a regional hub for electric vehicle (EV) production. The growing global demand for EVs offers an opportunity for Thailand to realign its industry focus and mitigate some of the structural challenges.
Production data reflects the extent of the challenges faced. Automotive output contracted nearly 20% year-on-year in the first 10 months of 2024. Export production dropped by a staggering 52%, while domestic production declined by 5%. This shift altered the export-to-domestic production ratio to 31:69, compared to 25:75 in 2023.
The MPC also pointed to broader economic uncertainties, particularly unpredictable U.S. policies, which could affect global trade dynamics. These risks underscore the need for robust and flexible monetary strategies to navigate an increasingly uncertain economic landscape.
Thailand’s auto industry stands at a crossroads, facing both significant challenges and opportunities for reinvention in the years ahead.