Thailand’s car production could be halved in 2020

Thailand’s car production could be cut in half in 2020 due to the coronavirus outbreak, said the Federation of Thai Industries (FTI)’s automobile club. 

The country is the eleventh largest car manufacturer in the world. It produced more than 2 million cars in 2019. FTI now expects only 50 per cent of that in 2020.  

“If the outbreak is prolonged until September, we are seeing only one million [cars produced],” the club’s spokesperson, Surapong Paisitpatanapong, told Thai Enquirer. 

He said of the one million, 500,000 will be for domestic consumption but the Thai economy is going into recession with high household debt and low private investment. 

The rest will be produced for exports.

“At the moment, we do not know if the situation for domestic sales or exports will be better once the outbreak is contained so we are keeping the prediction at 50 per cent for domestic and 50 per cent for exports right now,” Surapong said. 

He added that exports to the US, Europe and Japan are the most worrisome, while demand is starting to return from China.

“The situation is dire and it is now much worse than the flood in 2011,” Surapong said. “The water comes and goes in the country but the outbreak is worldwide and it is affecting every industry. If everything is bad, car sales will be bad,” he said.  

FTI’s prediction is less optimistic than Kasikorn Research Center’s projection of 1.5 million cars produced in 2020.

Surapong said the 1.5 million mark will only be reached if both local and global governments are able to gain control of the pandemic by June. 

Temporary closure

Many automobile manufacturers, including Toyota, Isuzu, Honda, Nissan, Mitsubishi and Ford, halted production in April. They are expected to resume operations by mid or late May.

Sales have dropped by 40-50 per cent during March and April. Most original equipment manufacturers (OEMs) cited concern over the spread of the virus within their factories.

There are many cars in stock at the moment. Some dealers have opted to lower prices to get rid of them. For example, Nissan X-TRAIL, which used to cost about 1.5 million baht, is now down to approximately 900,000 baht at a showroom in Chachoengsao.

As for the first quarter production, Thailand produced 453,682 vehicles between January and March, representing a drop of 19.2 per cent. Car sales dropped to 200,064 or 24.09 per cent in the same period of time.

The drop was at 41.74 per cent year-on-year to 60,105 units in March alone.

Surapong said most car manufacturers will only return to partial production in May because of their stock capacity, poor sales at dealerships and the disruption in the supply line.

“We have to import some parts for production but the disruption in the supply line is still there as many of the manufacturers in China and Japan have also halted their production in the past few months,” he explained. 

When asked if the drop in production could lead to workers being offloaded, Surapong said that it “could happen” if the outbreak lasts until September.  

The Thai automobile industry employs around 850,000 people and contribute about 10 per cent to the country’s GDP.

Surapong added that during the Tom Yum Koong crisis in 1997, manufacturers were still able to depend on loans from their parent company. 

The current economic crisis, however, is affecting even the parent companies in Japan, Europe and the US. This means that the subsidiaries in Thailand will be forced to look for ways to cut cost if production is halved in 2020.

Government measures

FTI is now asking the government for supportive measures to aid automobile manufacturers.

Surapong said the government could provide incentives such as a subsidy for people who wish to turn in their old car for a new one to promote domestic sales.

Newer cars will also reduce CO2 emissions, he added.

Kornkrit Jurangkool, FTI’s vice president and secretary of its automotive parts club, said last week that the temporary closure of OEMs’ production and the drop in domestic car sales and exports is playing havoc on replacement equipment manufacturers (REMs).

The drop in car production, sales and exports will lead to a contraction of 23 per cent for the REM sector in 2020.

He said OEMs are more negatively affected by the outbreak than REMs, however, since people are looking to fix up old cars instead of buying new ones during the economic downturn.

Kornkrit also urged the government to reduce the excise tax on cars by 10 per cent and to reduce the import duty on parts used for assembly. 

Currently, passenger cars with CO2 emissions of 150 grammes per kilometer or less are subject to 30 per cent excise tax in Thailand. The rate for cars with emissions of 150-200g/km are at 35 per cent and 40 per cent for more than 200g/km.

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