Auto Line Revamps and New Markets to Boost 2014 Exports

     KResearch forecasts that the Thai auto industry will be looking at around 6.0-11.0 percent export growth this year on an expected output of 1.16-1.22 million cars, beating 2013's total of 1.09 million units. We believe that the future potential for passenger cars is stronger than for commercial vehicles due to production line revamps aimed at outputting more export models. In addition, the Eco-Car Project Phase 1 bore fruit in raising the quality of locally-assembled vehicles, Thai carmakers have thus been more successful entering the small passenger car markets of certain countries, such as those on the North American continent.

     The Eco-Car Project Phase 2, now under development, is expected to become another success story that will help Thai auto industry gain greater recognition. Meanwhile, the National Council for Peace and Order (NCPO)'s efforts toward reviving the economy will add impetus to several new projects pending approval and therefore should help boost investor confidence toward the Thai economy. Within the near term, some important issues bear watching include the government's plan to establish a special economic zone, which could lend support to auto industry production chains.

     However, we are also up against some rival countries that have been major sources of FDI recently. Indonesia, in particular, has been trying to attract more FDI into its auto industry, by offering similar support to eco-car assembly.

     Although Thailand may feel some relief knowing that Indonesian output is primarily targeted large economies, we must admit that our domestic market is significantly smaller than Indonesia's, underscoring our heavy reliance on exports. With this in mind, to retain the regional number one auto industry position, many steps should be considered such as new projects to develop products that better meet foreign market preferences, as well as improvements in production technology and labor skills, with particular attention being paid to auto part manufacturing.

Source: KASIKORN RESEARCH CENTER (June 19, 2014)