Thailand Is Becoming a Colossal Automotive Hub
A fast growth of automaking in Thailand since the 2000s has transformed the country into the biggest auto manufacturer in SEA and 12th in the world.
As we know, Japanese makers have been running their operation in Thailand long ago. Seeing how well the Japanese market performs, European and American brands also followed. A lot of their plants are a major hub for exporting in the Asia Pacific as well as Australia market. This results in almost 400% growth in the auto industry.
The reason behind this success growth is attractive offers from the government to give foreign investors land ownership rights and a smooth visa for foreign auto advisors. Not to mention various tax incentives that favor foreign investors like 8 years exempt from corporate income tax to those who relocated to Thailand.
Why Thailand?
Beside from easy visa and perks from Thai government, Thailand is well situated geographically that provides both sea and air import/export. This gives Thailand an advantage over Indonesia or India market that lack in national resources and spend a high amount on importing. Thailand also benefits from free trade area agreement with nine other countries to pay zero (very low) tariffs for import and export autos within the region.
While some big companies like Apple chooses Chinese labors, a cheaper rate can also be founded in Thailand, though a little higher comparing to other countries, Thai labors compensates the higher wages by their professional skills and knowledge.
What to expect in the future?
Moving to Thailand 4.0, the government plans to start a $45 billion project for eco-friendly and electric car production in Thailand. This project is known as Eastern Economic Corridor (EEC), a modern metropolitan, a hub of trade and investment, a center for regional transportation and logistics, a significant source for human resources, a tourist attraction and most importantly, the most modern Gateway to Asia that can reach more than half of the world’s population. The development of this project will take place in Chachoengsao, Chonburi, and Rayong provinces, which currently is also Thailand’s heavy industry plants.
The trade war between USA and China
The tension has been escalating nonstop in the quarrel between the U.S. and China, and there does not seem to be an end to it. When the U.S. manufacturers cannot send their parts to be assembled in China and then import it back for the last assembly, the downsizing starts to appear. For example, Harley Davidson Kansas City’s plant that had been recently closed, while some reported that the plant would move to York and create 400 jobs more, some also said that the plant would move to Thailand. Yet, the President of United State of America Donald Trump urged the iconic American motorcycle brand should never be built elsewhere except the USA.
The new NAFTA agreement between USA-Mexico-Canada might be able to solve this problem, but that does not change the fact that Thailand is the target of all well-known manufacturers, aiming to establish their factories here, in Thailand.
The 4.4% of GDP growth in 1H18 has proven that Thailand’s economy is growing fast, and there are still plenty of rooms for its growth. And once the election processes are settled, no doubt that it will create good sentiment for all foreign investors.