Thailand's automotive industry faces challenges from declining vehicle production, weak domestic demand and increasing international competition.

Industry representatives have called for coordinated government and private-sector action to address these issues.

Yuphin Boonsirichan, president of the Thai Automotive Industry Association (TAIA), said efforts to revitalise the industry had been discussed for years, but significant obstacles remained.

Thailand developed its automotive manufacturing sector through large-scale production and an extensive supply chain. However, output has declined in recent years due to weak domestic demand, difficulties obtaining automotive loans and uncertainty in key export markets. While electric vehicle (EV) production continues to expand, internal combustion engine (ICE) vehicle manufacturers face lower sales and production volumes.

Under pressure

Thailand has fallen from 10th to 11th place in global vehicle manufacturing but remains Southeast Asia's largest automotive producer. According to the Federation of Thai Industries (FTI), Japanese automakers account for 73% of Thailand's vehicle production capacity, followed by Chinese manufacturers at 16%, European brands at 5%, and US and South Korean companies at 3% each. The sector includes conventional vehicle and EV manufacturers, supported by parts suppliers across the production chain.

Challenges include a slowing economy, high household debt and stricter bank lending requirements to limit bad loans. Geopolitical tensions in the Middle East have also disrupted major export markets.

"Thailand's automotive industry must find new markets in the near future. This issue must be carefully considered," Ms. Yuphin said.

Global competition

Global automotive production increased by 4% year-on-year last year, while Southeast Asian output declined by 2.6%. TAIA has raised concerns about China's growing share of global vehicle production. Between 2016 and 2025, China's share increased by 23%, while Thailand's declined by 25%.

Ms. Yuphin said additional government policy support was needed to maintain Thailand's position among the world's major automotive manufacturing centres.

"It is imperative for the government to implement serious measures to protect local industry and ensure Thailand maintains its position as a major global player, and the leading auto producer in the region," she said.

Export slowdown

Industry executives remain cautious about recovery prospects due to continuing export challenges. Thailand aims to restore annual vehicle production to its 2011 level, although weakening demand and increasing competition present obstacles.

The FTI's Automotive Industry Club reduced its vehicle production target for this year, lowering the export target while maintaining the domestic sales target.

Surapong Paisitpatanapong, adviser and spokesman for the club, attributed the revision largely to geopolitical instability in the Middle East. Exports to the region fell by more than 38%, he said.

Thai exporters also face increased competition from Chinese EV manufacturers in overseas markets. US tariff measures and stricter carbon emission regulations affecting new ICE vehicles in several countries have further affected export prospects, Mr. Surapong said.

EV sales growth

EV adoption is changing Thailand's domestic automotive market. Government incentives under the EV3.0 and EV3.5 programmes, including tax benefits and subsidies, have supported adoption and attracted foreign investment, particularly from Chinese manufacturers.

Battery EVs accounted for a 30% share of passenger car sales during the first half of the year, while ICE passenger cars accounted for 15.7%, according to the Automotive Industry Club.

Industry representatives said rising EV imports and expanding domestic EV production capacity had prompted some manufacturers to reduce output in response to market conditions. Conventional pickups remain part of the domestic market, although their sales share has declined. Oil-powered pickups accounted for 20.2% of sales during the first half of the year.

According to Suwat Supakandechakul, chairman of the Automotive Industry Club, pickups accounted for 23% of total vehicle sales last year, compared with 45% in 2010 and 2011.

Supply chain measures

Industry representatives have called for measures to support ICE vehicle manufacturers and parts suppliers as the sector transitions towards electric mobility.

ICE pickup production uses locally sourced components for up to 90% of its requirements, involving thousands of businesses across the supply chain.

Mr. Suwat said government policies should account for differences between manufacturers rather than impose uniform production requirements across the industry. He also proposed allowing automakers to deduct excise tax based on the value of locally produced parts used in their vehicles to encourage domestic sourcing.

Current regulations require local content for only certain components, with limited incentives to encourage wider use of Thai-made parts.

Mr. Suwat also urged the government to promote common components across multiple vehicle models, particularly those manufactured by Thai-owned suppliers. He said these measures would support domestic parts suppliers as the industry transitions from conventional vehicles to electric mobility.