The Future of Automotive for Thailand
Date: January 2022
Author: Manoon Manusook: Thailand Customer Industry Leader
Narain Chutijirawong Ph.D.
Chodok Panyavaranant Ph.D.
Over the years, we have seen extensive development of electric vehicles (EV), starting from the Hybrids Vehicle era to the Plug-in Hybrids Electric Vehicle (PHEV), which took times has taken time to gain acceptance in the Thai market. Until now, Battery Electric vehicles (BEV) have surprisingly gained the most attention from customers. The competition between carmakers is fierce, and the new players from China are getting increasingly aggressive in market penetration.The EV market accelerators stem from the ongoing dilemma of fluctuating oil prices and environmental concerns. Many leading car manufacturers such as Daimler , Audi , and Hyundai have also announced discontinuing R&D for internal combustion engine (ICE) development.The question arises, how far will this trend go? Will the only noticeable change we see be the shift from ICE to BEV? What will the automotive industry in Thailand look like in the long-run?
What we can expect
According to Deloitte's Future of Automotive Sales and Aftersales: Impact of current industry trends on OEM revenues and profits until 2035 , forecasted trends have been grouped under four major categories, also known as CASA Trends. CASA is simply an acronym for C-connectivity, A-alternative drivetrain, S-shared mobility, and A-Autonomous Driving.
Technology has come a long way past the basic multimedia features offered in vehicles. Today, we can start the engine to turn on the air conditioner and wait for the car to cool down before getting in, all through a few taps on our smartphones. However, connectivity can go much beyond that, with two main characteristics being 1) Connected Car and 2) Connected Customer.
Connected Car: Under connectivity comes the term ‘V2X’ or ‘Vehicle-to-Everything’. This term includes many possibilities on how a vehicle can connect or be connected. Vehicle-to-network (V2N) facilitates exchanging information between cars, trucks, buses, traffic lights, vehicle-to-vehicle (V2V) systems enable vehicles to communicate with each other, vehicle-to-pedestrian (V2P) systems allow vehicles to communicate with pedestrians, and vehicle-to-grid (V2G) lets cars communicate with power-grids, to support receiving and selling electricity back to generate income for owners.
Although the aforementioned V2X system pushes the car's price up,
survey results from China, the US, Europe, and Japan have provided positive feedback. Results show that consumers are willing to pay more for features that will support the driver in the long run.
Connected Customers: This explores the idea of expanding the car buying experience through an efficient online system, and more closely meeting the needs of other services such as maintenance.
Alternative Drivetrains (A)
The emergence of alternative drivetrains will align with consumer expectation and changing engine power, from the original internal combustion engine to a 100% electric motor system or BEV.
However, the survey results across regions fluctuate. The attractiveness can be
summarized as follows: China is open to creative solutions such as battery swapping, mobile charging, and one-stop charging. Some region focus on the CO2 emission standards such as Euro5, financial incentives, and public charging infrastructure funding program. On the other hand, US consumers still prefer internal combustion engines (ICE) because of their long-distance travel, and the price of gasoline is affordable relative to wages. Finally, in Japan, they tend to focus more on the Fuel-cell Electric Vehicle (FCEV) rather than BEV.
Shared Mobility (S)
Allowing car owners to increase the return on investment of their vehicles while keeping the same car prices can be simple with a partial reduction in ownership. Thai people have begun to adopt this idea over the past few years as well. This has fueled the introduction of several ride-sharing applications where the user can call a car, a motorbike, a van, or even a luxury car for a ride.
The key factor driving this change is the rise of urbanization, coupled with the rapid development of payment processing infrastructure and micropayments. These changes have been largely effective, given that in this day, consumers are tech-savvy enough to quickly adopt the new nature of shared mobility.
Moreover, the survey reveals that governments plays a significant role in setting specific drivers' regulations. For example, China and Euro5 will use price and tax structure mechanisms to force car ownership to seek leverage if anyone needs to buy a car.
Surprisingly, the US and Japan forecast’s show that they are slower to accept this change. This is due to car prices in the US being relatively low compared to the cost of living and low exposure to alternative drivetrains. At the same time, Japan has had excellent and reliable public transport systems for a long time, therefore it is not as easily accessible if new players enter the market.
Autonomous Driving (A)
The final trend, Autonomous Driving, is termed by the industry as Advanced Driver Assistance Systems (ADAS) at level 4 shown in the figure above or also known as, High Automation.
As shown in figure, ADAS has five levels starting from Level 1 Feet Off, which we know well as a system called cruise control/adaptive cruise control. Or, the auto brake system that slows down or even stops the car when it needs. Level 2 Hands Off, is also known as Lane Keeping Assistance (LKA) system. The vehicle can warn the driver or even pull the steering wheel back when the car detects an unusual direction. Level 3, Eye Off, is a level where the driver doesn't have to look in the direction they are going at all times, but still has to make decisions at critical moments. Level 4 Brain Off, is when the driver can sleep whilst in the driver’s seat. This level is well-known as Full Self-Driving (FSD ). Lastly, Level 5, is where the vehicle no longer requires a driver. The car is able to travel according to a pre-defined program.
ADAS is currently a technology that is still in development, and more importantly, it will take time to build consumer trust. However, the system also requires powerful machine learning and ample computing power to make quick decisions based on complexities of road surfaces, traffic conditions, and a variety of regional road behavior.
In reality, the concepts under CASA cannot arise by car manufactures alone. According to the trends, OEMs and new players can jump into the new arenas to fulfill the automotive supply chain. For example, in 'Connectivity,' an effective V2X system requires a lot of technologies in data management such as data-as-a-service to link vehicles' and drivers' data on the roads and make them communicate to each other effectively.
'Alternative Drivetrain' needs infrastructure services such as parking, charging, or battery swapping systems (as seen in China) to compensate for the limitations of the BEVs in order not to be a hindrance in traveling long distances.
In comparison, 'Shared Mobility' demands reliable platforms, e.g., vehicle-on-demand and mobility-on-demand, to help customers conveniently access the car. At the same time, car owners do not have to feel disturbed by the benefits of the vehicle to be worthwhile.
Lastly, 'Autonomous Driving mandates trusted systems from machine learning (ML) and the internet of things (IoT) that allow drivers to travel safely, comfortably, and without worries.
The government plans to incentivize users to purchase EV by establishing a fund to subsidize up to 20% of the new EV prices. Also, they are increasing the tax on almost all excise cars, including passenger cars, eco-cars, hybrids, and plug-in hybrids, to allow different vehicle tax rates for EV.
However, changing the landscape of the Thai automotive industry is not a simple as shifting gear. The transition of Thailand automotive industry from ICE to BEV would face a steep challenge and huge obstacle due to a long history of ICE supply chain development. Many stakeholders in the automotive supply chain would need to revamp and reskill themselves for firms, expertise, and labor skill, which means a big chunk of investment to be considered.
In the end, the car that drives us today may not be the car that drives us into the future. According to Sun Tzu, “Victory comes from finding opportunities in problems.” These trends will be the vision game that proves who will be the real winner of the new arena.