Production, domestic sales and exports of cars continue to drop by 40-50 per cent in June but manufacturers are still maintaining a production target of 1.4 million units for 2020, the industry’s representative said on Thursday.
In comparison, there were two million cars manufactured in 2019 while the current production level is already at a 30 year low.
Surapong Paisitpatanapong, a spokesperson for the Federation of Thai Industries’ Automotive Club (AIC), told Thai Enquirer that domestic demand is returning as economic activity resumes but there is still a big concern over exports.
Only 700,000 units of the 1.4 million production target will be gunning for domestic sales and another 700,000 units for exports.
“Only exports to China and the Middle East are expanding at the moment while the rest are all down, especially for the US and Europe,” he said.
However, exports to China and the Middle East cannot compare to the drop in other major trading partners in ASEAN, Australia, Europe and the US.
Surapong said reopening businesses in May, the government measures to help workers and farmers affected by the outbreak, the measures to promote domestic tourism, and lifting the entry ban for specific groups of foreigners will continue to improve domestic demand.
However, the possibility of a second wave of the coronavirus outbreak could derail all possibilities, which is why the AIC is still concerned with employees within the carmaking industry.
The automotive club said earlier that 300,000 people could lose their jobs if the government does not help the sector as they are suffering from lowered domestic and global demand.
“The situation is improving but some makers have chosen to lower wages and some are offering a sovereign package for workers who are willing to leave to and join other industries, such as medical equipment and supply, which is currently experiencing a shortage of workers,” he said.
“If there is a second wave that is as severe as the outbreak in March and April, the impact on the sector will be worse,” he added.
Surapong said if there is no second wave, lay-off concerns could dissipate.
Ong-Arj Pongkijworasin, the AIC’s chairman, told Thai Enquirer in May that if the industry could sell more than 700,000 units domestically, the entire industry, including carmakers, parts manufacturers, dealers, maintenance centers, and finance players, should be able to keep on hiring.
The Thai automobile industry currently employs around 850,000 people and contributes roughly 10 per cent of the country’s GDP.
Surapong said the AIC continues to urge the government to come up with measures to help stimulate domestic demand until economic activity and global demand returns to normal.
“We still do not know when a vaccine will be found so domestic demand should be stimulated to counter the expected continuous drop in global demand,” he said.
Production, domestic sales and exports
According to the AIC, Thailand produced 71,704 cars in June, down 58.52 per cent year-on-year.
Production for domestic sales dropped by 67.39 per cent while production for exports dropped by 49.19 per cent in the same month.
For the first six months of 2020, Thailand produced 606,132 cars, down 43.14 per cent year-on-year.
Domestic sales dropped by 32.6 per cent year-on-year to 58,013 units in June.
For the first six months of 2020, Thailand sold 328,604 cars domestically, down 37.3 per cent year-on-year.
Exports dropped by 48.71 per cent year-on-year to 50,049 units in June with a total value of 29.24 billion baht, down by 43.06 per cent year-on-year.
Combining with the exports of car parts, the total value became 36.06 billion baht, down 50.52 per cent year-on-year.
For the first six months of 2020, Thailand exported 350,550 cars, down 37.39 per cent year-on-year at a total value of 187.98 billion baht, down 34.09 per cent year-on-year.
AIC’s proposals for measures to stimulate domestic demand
- The temporary reduction of excise tax on domestically produced cars by 50 per cent from now until the end of 2020. Right now, passenger cars with CO2 emissions of 150 grammes per kilometre 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.
- Provide incentives for people to turn in their old cars, aged 20 years or older, for a new one in order to receive a discount of 100,000 baht. This is similar to the first-car-buyer tax rebate program that was introduced during the flooding crisis in 2011.
- Postpone the implementation of the Euro 5 emissions standard from 2021 to 2024. The current Euro 4 standard was announced in Thailand in 2012, seven years after it was put in place in the Eurozone. The investment to shift from Euro 4 to Euro 5 would cost carmakers at least 10-12 billion baht to comply. This will then reflect on car prices, and in the end, the consumers are the ones to take on the burden.
