2015_Thailand_Motor_Expo_girls-39

Carmakers that have invested in Thailand, particularly the big Japanese brands, are in favour of the Kingdom getting into more free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) agreement, a US-led 12-nation trade pact that Malaysia is a part of. The reason is simple. More potential for exports thanks to reduced tax/duty barriers.

However, Thailand not being a part of the TPP agreement is unlikely to greatly affect the country’s automotive industry despite Japanese car firms’ worry over the pact, signed last October, according to Assoc Prof Archanun Kohpaiboon, an economics lecturer at Thammasat University.

The Bangkok Post report quotes Assoc Prof Archanun as pointing out that the majority of Thai auto exports are to Asia, the Middle East and Oceania, where logistics costs are relatively low. Thailand already has FTAs with countries that impose no import tariffs on vehicles, he told a seminar held by the Thai Automotive Industry Association.

thailand traffic

Joining the TPP would give better access to the United States, Canada and Mexico where Thailand has no current FTAs with, said Deunden Nikomborirak, research director of the Thailand Development Research Institute. US import tariffs are 2.5% for passenger cars and 25% for pick-up trucks. Today, Thailand only ships compact eco cars to the US, representing 5% of the country’s vehicle exports. Our neighbour is now actively courting Japanese green car production.

The Thammasat academic said that car companies in Thailand were unlikely to move their production bases to TPP members if the Land of Smiles did not join the pact. In ASEAN, Brunei, Malaysia, Singapore and Vietnam are in the TPP, but Thailand and Indonesia are not.

“At present, Thailand has yet to lose much competitiveness against four ASEAN countries that joined the TPP. The pact will deliver a huge impact to Thailand once they develop their own automotive industries to support TPP members or Indonesia decides to join the trade pact,” CEO of Honda Automobile Thailand Pitak Pruittisarikorn was previously quoted as saying.

2015_Thailand_Motor_Expo_girls-43

The Thai government has been proceeding with talks under the framework of existing FTA pacts, and new ones with the likes of Pakistan, Turkey, Russia and some countries in the Middle East and Africa.

Meanwhile, Thai car exports might see flat growth this year as the recovery of the global economy is proving much slower than expected. Asia and Oceania aside, overseas demand for Thai-made cars are expected to remain sluggish.

The Federation of Thai Industries automotive industry club projected in January that car exports could possibly inch up by 1-3% this year to between 1.22 and 1.25 million, compared to a 6.81% growth in 2015.

Exports are important to maintain production volume as domestic auto sales are expected to be around 750,000 to 780,000 units this year, down 2.5% to 6.2% from 2015, impacted by the new excise tax that took effect in January. Should it slide as expected, 2016 will be a fourth straight year of decline.