Entering 2021, the Thai auto parts industry may have to contend with new challenges that have emerged in the US, one of its primary importers. Of late, the US has announced the suspension of GSP privileges, which included many auto parts that are produced in Thailand. For this reason, Thai auto parts manufacturers may not be able to utilize the same pricing strategy to compete in the US. If Thailand fails to secure new markets for its auto parts exports within 2021, when GSP suspension takes effect, Thai auto parts manufacturers will most certainly have to engage in price competition with foreign competitors. Overall, Thailand’s auto parts exports are set to decline in the forthcoming period. KResearch projects that the total export volume for Thai auto parts to the US (including those that lost their GSP eligibility) will likely be reduced to THB 11.28 to 11.70 billion, a contraction of 8 to 11 percent from the estimate of THB12.70 billion in 2020.
However, this issue is not the only challenge facing Thai auto parts manufacturers over the coming year. Once Joe Biden is inaugurated as the new US president, the policy to promote the creation and growth of an electric vehicle market, particularly BEVs, will gain traction. There are also indications that the US will rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is expected to affect Thailand in many ways. Since the majority of Thai auto parts exports to the US are REM parts for cars with internal combustion engines, Thai manufacturers stand to be affected unless adjustments are made to accommodate the new technology. This situation may also pose a risk to Thailand’s status in the supply chain of EV auto parts. KResearch asserts that Thailand should now expedite preparations for attracting investments in electric vehicles from both automakers and auto parts manufacturers, ahead of its competition. The move would allow Thailand to become part of the new supply chain that represents the future trend wherein the US remains one of the key customers for both OEM and REM markets.