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8 Jun 2009


Struggling Global Auto Industry: Fierce Rivalry vs. Investment in Thailand (Business Brief No.2527)

The global automotive industry has been hit hard by heavy slumps in sales in light of the worst US financial crisis since 1930s. Two US auto giants finally filed for Chapter 11 bankruptcy protection. Automaker executives have confirmed that they will keep their manufacturing bases here intact. This implies that Thailand will maintain a leading role as a major auto-manufacturing base in Asia.
Nonetheless, KASIKORN RESEARCH CENTER (KResearch) holds the view that our status as a major investment destination for the automotive industry may be put in jeopardy amid heightened competition in the region. Thai policymakers should focus on how to enhance our competitiveness and maintain our status as a major regional investment base.
The data on Japanese automotive industry investments in Asia showed that their investments in Thailand dropped 38.5 percent in 2008, though recording increases in China, India and Vietnam. Japanese investments in the Thai auto industry are expected to decline further in 2009. The investment value of metal product, machinery and transport equipment projects submitting applications for BOI promotional privileges during the first four months of this year (4M09) showed a decline of 44.8 percent YoY.
Amid intense rivalry in the region, both the governmental and related agencies should put priority on seeking ways to boost our attractiveness as an investment destination for the automotive industry, otherwise we may lose out to neighboring countries. Emphasis should be placed on boosting our strength through personnel development, upgrades in support industries – especially in terms of advanced technology for future auto production – focusing on fuel-efficient and alternative energy-powered vehicles in order to offset rising labor and raw material costs; maintaining product quality is also a necessity.
Meanwhile, all weaknesses should be addressed properly. This is particularly true for the domestic political instability that has undermined investor confidence. Clarity should also be focused, especially in the government's long-term policies for the automotive industry vis-à-vis the national energy development plan. Moreover, greater opportunities should be sought for the auto industry including the favorable investment promotional measures, new potential markets along with support for free trade agreements with trade partners.

Thus, the Thai automotive industry that has seen declining investment due to the global recession may remain attractive to investors. Most importantly, the government and related parties should join hands to promote confidence with investors and be ready to provide assistance to those in trouble in this time of crisis. This would help maintain Thailand's image as an interesting investment destination.

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