Impact to Automotive Supply Chains in Thailand

Author: Chodok Panyavaranant Ph.D.
Manager | Clients and Markets
Deloitte Thailand

Recently, there has been a dramatically increasing adoption of Electric Vehicles (EVs) in the Thai market, with more than two-fold growth over the past few years. According to Electric Vehicle Association of Thailand (EVAT), the cumulative number of registered EVs has risen from 5,685 to 11,382 or twice, from 2020 to 2021. Besides, in 2022, the Thai government injected further incentives for EV investment in Thailand by reducing import duty from 80% to 40% and excise tax from 8% to 2%. As a result, the demand for EVs is growing incredibly. Some car companies announced they would no longer accept bookings to deal with overwhelming queues. Just in the first quarter of 2022, EVs had already increased from nine players by 3,084 . The growing number of EVs reflects consumer sentiment.

From Deloitte Global Automotive Consumer Study 2022

According to the Deloitte 2022 Global Automotive Consumer Study - Southeast Asia perspectives surveyed six countries across SEA, including Indonesia, Malaysia, Philippines, Singapore, Vietnam, and Thailand. The study collected data from 6,000 consumers that indicated needs in functions and features of an EV across SEA countries. However, in this case, we compare the average of SEA and the Thai market, with 1,004 Thai respondents as below.

Overall, consumer demand in Thailand is primarily consistent with SEA, with only a few differences, for example...

• Even though SEA people are slightly more Willing to Pay for Advanced Technologies, these two are the top two for Thai people: On average, 91% of SEA are eager to pay for Safety Technology, while Thai is 87%. Also, 89% of SEA is anxious to pay for Alternative Engine Technology, while Thai is 86%.
• SEA people have a less serious concern in Climate Change than Thai in terms of factors that impact the decision to acquire an EV: 48% of SEA is concerned about Climate Change/Reduced Emissions, while Thai is 49%. SEA has greater attention to Lower Fuel Costs and Better Driving Experience, while Thai is 44%. Plus, 49% of Thai customer Thai also concerns on Lesser Maintenance at the same level of climate changes.
• SEA people expect a significantly less Driving Range than Thai for fully charged all-battery EVs: On average, SEA expects the driving range at 491 kilometers per charge. In comparison, Thai consumers expect a distance of 560 kilometers per one charge.
• SEA people have less concerned with the Critical Factors Regarding Battery-Powered EVs: the SEA average says 28% are worried about the Lack of Public Charging Infrastructure, while Thai is 33%. On average, 13% of SEA are Afraid About the Driving Range, while Thai is slightly higher at 15%.
• SEA’s market perceives EVs to Have a lower Environmental Impact than ICE less than Thai. The SEA people average says 63% believe EVs have a lower environmental impact, while 77% of Thai consumers believe so.
• SEA people prefer to Charge their EVs at Home less than Thai: the SEA average says 61% want to charge their vehicles at home, while Thai is 69%.

The last point is very important, Thai is the top country where more than 50% of the consumers will make decision to purchase an EV will change if electricity was priced similar to current fossil fuels compare to other countries in SEA.

What is the impact on the supply chain in the Thai automotive industry?

The interesting question is, what will happen to the automotive supply chain in Thailand? According to Deloitte Insights from Deloitte's 2021 Automotive Supplier Study - The road ahead: Auto suppliers navigate new terrain. A recent analysis of financial data from nearly 300 top global automotive suppliers makes this point even more evident. The projections for the 2020–2025-time frame found that the transition from ICE to BEV will affect the market size of the supply chain in various dimensions, including growth, stagnant, and decline.

Supply Chains to growth: Top Spots include exponential growth includes electric drivetrains (up 475%), batteries and fuel cells (up 475%), and Advanced Driver Assistance Systems (ADAS) and sensors (up 150%).

Supply chains that will be stagnant: They are unaffected by the transition from ICE to BEV, including Body which is the most considerable portion of the industry (10%) as well Seats (10%), Axles, Info and Communication, Frame, Suspension, and Steering are slightly growing about 9% in average.

Supply chains that will be declining: The business that has the highest impact from shifting to the EVs is Internal Combustion Engine (ICE) (-15%), Fuel System and Exhaust System (-15%), Transmission (-10%), and Brakes (-5%)

Challenges and Opportunities

Supply chain challenges are increasingly daunting, with suppliers and relationships constantly shifting, and leaders are often unsure which tools or technologies might help forecast risk areas. The change of logistics due to the pandemic has changed almost everything.

However, the changes will emerge, and new industry players will accelerate the automotive supply chain investment. Or it is the time to build and rebuild relationships with suppliers. Or it is the time to look to vertical integration to shore up weak spots and avoid relying on independent suppliers or, worse, competitors.

Though it is hard to predict what will happen in the future, the business needs to stay close and monitor the move, but it is exciting to keep up with the actual movements that are about to come. We hope it will be a bright new opportunity for the Thai automotive industry in the future.