Display mode (Doesn't show in master page preview)

10 Feb 2017

International Economy

Relocation of Auto Production to the USImpact on Future Japanese Auto Investment (Current Issue No. 2825 Full Ed.)

คะแนนเฉลี่ย
The first official Trump-Abe meeting is scheduled for February 10, 2017, in Washington D.C., wherein many issues will be discussed. In KResearch's view, one of these topics will likely be deliberations on a US concern that Japanese carmakers should increase their investments and job creation in the US. Over recent years, many carmakers from the US, Europe and Japan have shown interest toward building production facilities in Mexico where there is an advantage in production costs versus the US. Under the North America Free Trade Agreement (NAFTA), cars produced in Mexico and exported to the US can benefit from a tax-free import status, thus leading to factory closings and worker layoffs in the US. This is the reason why President Donald Trump is seeking to boost investment and employment in auto manufacturing within the US, including in Japanese autos.

KResearch views that there is a possibility the US may terminate the NAFTA pact and enter into bilateral talks with Mexico ahead. Also, taking into account the new president's tax reform and investment promotion initiatives that may be implemented soon, the cost structure of Mexico's auto exports to the US may change substantially, and also a possibility that Japanese carmakers may shift some assembly plants in Mexico to the US. However, any impact on Thailand vis-à-vis such developments there would be limited, since the auto supply chain on the American continent is quite remote from Southeast Asia.

Relative to the US trade deficit with Japan in auto exports, KResearch expects the US government may ask the Japanese government to consider relocating the production facilities of some car models to the US, rather than exporting them CBU from Japan. This request may be added to talks on revising regulations and standards to accommodate the entry of American carmakers into the Japanese market. Such changes would then affect Thailand since we would see a decline in Japanese production of new car models here, and thus our automobile exports and perhaps auto-parts, too.

View full article


International Economy