The Top Ten Global Automakers

In 2010, Thailand’s automotive industry grew by 63% with 1.6 million cars produced, ranking it as 13^th (it currently ranks as 12^th) amongst the world’s motor vehicle producing countries. After recovery from Japan’s massive earthquake and tsunami in March, thanks to the recovery of Japan's automotive industry, Thailand’s automotive industry has got back on track, and it expects to see its output of motor vehicles reach 1.8 million units by the end of this year.  

Even though the earthquake and tsunami in Japan affected the Thai auto-parts manufacturing industry for a short while, it still expects a 20% sales growth this year. In the first six months of the year, the industry saw 15% growth due to demand from both domestic and export markets. The key export markets for Thailand's auto-parts in the first half of 2011 were Indonesia, Japan, Malaysia, Vietnam and Brazil. According to the Department of Export Promotion, Thailand’s auto-parts exports rose 16.4% year-on-year to 138 billion baht during the period.

The Thailand Automotive Institute (TAI) expects motor-vehicle output will increase to two million units in 2012 due to the production of pick-up trucks and passenger cars, including eco-cars. By 2015, the TAI expects that Thailand’s auto production capacity will reach 2.5 million units per annum and the country will become the world’s 10th largest automaker. Some auto industry analysts have pointed out that there are many factors behind the growth of Thailand’s automotive industry, such as an expanding network of free trade agreements (FTAs) with China, Australia, India and New Zealand.

Nevertheless, with the new government’s policy to increase the daily minimum wage to 300 baht nationwide, many parties are concerned that the Pheu Thai party's populist campaign will affect Thailand’s automotive industry. Thavorn Chalassathien, the spokesman of the Thai Autoparts Manufacturers Association, mentioned that over 500 automotive factories will be immediately and heavily affected by the daily minimum wage rise. With higher costs of production, the price of automotive spare parts will be increased by 10-15%. The government should support entrepreneurs, especially the 1,000 SMEs which account 50% of the automotive spare parts factories across the country. Otherwise, carmakers will source cheaper parts from outside Thailand, especially cheap parts imported from China and India, where labor costs are lower.

On the other hand, there are some parties who don’t think the plan to raise the minimum wage to 300 baht per day will have much effect. Wanlop Tiasiri, the director of the TAI, said “The daily minimum wage policy will not have an impact on the automotive industry because automakers are at present paying wages at a higher rate.” Confirming this, Weerasak Kosurat, the Executive Director of the International Institute for Trade and Development (ITD), believes that a rise in the daily minimum wage will not prompt a relocation of production bases or drive away foreign investors from Thailand. This is because workers in Thailand are cheaper than in some other countries. The only concern is the shortage of manpower.

Recently, Padermchai Sasomsap, Thailand's Labour Minister, unveiled a plan to firstly increase the daily minimum wage to 300 baht in just seven provinces - Bangkok, Samut Prakan, Samut Sakhon, Nakhon Pathom, Pathum Thani, Nonthaburi and Phuket - with the rest significantly rising in January and then climbing to 300 baht within two years.

Until then, nobody knows how much the daily minimum wage policy will impact Thailand’s automotive industry. But, auto industry experts have warned that foreign carmakers and investors may shift their business to lower-cost countries such as Vietnam and Indonesia. In that case, we may not see Thailand’s auto production capacity reach 2.5 million units per annum, and Thailand won’t become the world’s 10th largest automaker by 2015 as many parties expected.