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27 Aug 2020


FTA backs automotive industry, establishing links to global supply chains and boosting cars and auto parts exports and investment (Current Issue No.3129)


​                Presently, automobile and auto parts manufacturers, especially Japanese brands, are progressively moving away from production processes that emphasize keeping costs low, like lean production, to production that leans more towards agile supply chains in order to quickly respond to potentially volatile situations. As a result, selecting a production base to support this new production process has grown in importance. For this new production process, investors tend to choose a country that has established economic cooperation with other production bases outside their region. This will be conducive to the implementation of an agile supply chain, which would make it easier to achieve economies of scale in their production. Thus, KResearch perceives that becoming a member of economic cooperation with links to major consumer markets around the world, like the EU or the Americas, is crucial to attracting more foreign investment. Thailand would then be able to become a part of the new supply chain, particularly for EVs, a supply chain that would bring Asia closer to markets in other regions through increased usage of a shared platform.

             ​KResearch views that joining a free trade group like CPTPP, which includes members on the American continent like Mexico and Canada, may help to expand opportunities for investment and exports of auto parts from Thailand to Japan and Mexico through deeper trade relations between the two continents, namely North America (Mexico and Canada) and Asia (Japan). Thailand has the opportunity to develop into an auto parts production base in the automotive supply chain for both blocs, especially since more and more carmakers have warmed to using shared platforms. In addition, Thailand could still ship a bigger volume of vehicles directly to Mexico, following Mexico's decision to readjust the relevant tariff from 30 to zero percent. KResearch expects that if Thailand becomes a CPTPP member, within the 5-year period after the agreement comes into force, Thailand should be able to export more cars at a value of not less than THB 8.5 billion, and auto parts of not less than THB 12 billion. Such a scenario could achieve fruition only if the government does not delay in joining the negotiations, and the transition to EV technology happens gradually.