Tanaka Kazushige, Director-General of the Trade Policy Bureau at the Ministry of Economy, Trade, and Industry of Japan (METI), spoke at the Japan-Thailand Public-Private Automotive Business Forum for Energy and Industry Dialogue in Bangkok held recently.

He discussed Japan's policy regarding industrial cooperation with Thailand in the automotive sector. He also stressed that local suppliers are essential for growth, especially in the light of the industry's overall transition to EVs.

Tanaka outlined that Japan and Thailand have maintained a partnership for over 60 years, which has contributed to the development of a robust supply chain and the creation of employment opportunities through technology and expertise exchange.

From 2013 to 2022, Japan invested approximately THB 1.2 trillion (US$ 35 billion) in Thailand.

By October 2023, 5,856 Japanese companies were operating in Thailand, 2,348 of which were part of the automotive supply chain, employing more than 70,000 skilled workers.

Tanaka noted that Thailand is an important hub for vehicle production and export, benefiting both Thailand and Japan. This success is the result of ongoing efforts from various stakeholders, including the Thai government, suppliers, and the Japanese government.

He also emphasised the significance of maintaining competitive local suppliers in Thailand. The Japanese automotive industry relies heavily on these suppliers.

For instance, 90% of the parts used in popular pickup trucks exported to Australia and other markets are sourced from Thailand, which has a direct impact on the national economy.

Tanaka stressed that local suppliers are essential for continued success, particularly as the industry transitions to electric vehicles (EVs).

He encouraged Thailand to focus on strengthening its local suppliers rather than relying on imported EVs or EV batteries, which would not support the growth of the local supply base.

The automotive industry is shifting towards green energy and digitalisation, and to support this transition, the Japanese government has introduced several initiatives:

1. Promoting the EV ecosystem: This includes funding for technology development, risk reduction related to strategic raw materials like batteries, subsidies for EV purchases, support for charging stations, and tax incentives to encourage domestic production.

2. Utilising hydrogen energy in transportation: Japan is advancing a hydrogen society with legislation passed in May 2024 to promote hydrogen use, set to be implemented by November.

3. Encouraging synthetic and biofuels.

Tanaka explained the differences between combustion and electric vehicle engines, noting that EVs do not require traditional engines.

He cautioned that suppliers unable to adapt to the production of EV components may lose customers. The Japanese government is supporting the transition to EV technology.

On the topic of digital transformation, Tanaka highlighted the importance of data collaboration. For example, the European Union's European Battery Regulation requires the reporting of the carbon footprint of vehicle production for EV exports.

In Japan, a centralised platform has been developed for this purpose, where suppliers provide carbon footprint data to manufacturers, who then submit it to the platform.

Tanaka suggested that Thailand adopt a similar platform, given its role as a global production hub. He noted that such a system would be essential for exporting to the EU and has already been discussed with the Thai government and industry.

Successful implementation of this system would also benefit exports to other markets such as the US and Australia, particularly as environmental concerns rise in these regions.