Amid a new round of the US-China trade dispute, China has announced a 25 percent tariff hike on US car imports, effective December 15, 2019. This is expected to adversely affect US car shipments to China later on. However, it may benefit Thailand because luxury carmakers, namely BMW and Mercedes Benz that have their major production bases for some models in the US, will likely move such production to Thailand for export to China sooner.
We at KResearch view that there a likelihood that such carmakers will partially relocate production from the US to Thailand for export to China ahead. It is expected that the number of luxury car manufactured here for export to China will increase over the current level by at least 15,000 units in the future, representing an increase in the export value of over USD844 million. As a result, the value of Thai passenger car shipments to China may increase more than 373 percent over the USD226 million reported for 2018. This will immediately make China to become our second largest export market for passengers, compared to its current ninth spot.
Although such an increase in our passenger car exports to China represents only 2 percent share of China's total passenger car imports, KResearch views that such a figure may rise significantly in the future if those luxury car makers decide to increasingly relocate production to Thailand to avoid long-term risks and take advantage of Thailand's status as a car export hub.
Although Thailand will be able to export more cars to China in 2019, Thai car shipments overall will likely be plagued by numerous downside risks, especially the protracted trade war. Given this, KResearch has decided to maintain our growth forecast for Thai automobile exports overall for 2019 at a contraction of 2.7 percent.