Thailand Auto Parts Makers Can Bounce Back If They Diversify
Despite transitioning to Electric Vehicles, Thailand auto parts businesses can be resilient with a little push from the government to diversify — with auto parts making to medical devices.
Currently, steel and metal industries are hit hardest in Thailand as production costs remain high and cheap Chinese goods flow into the market. Thailand had 561 factories shutting down this year, primarily in the steel and metal industries. The Federation of Thai Industries (FTI) warns that if production costs, including energy, transportation, and interest rates, remain high, more closures are likely.
The FTI is urging the government to take immediate measures to support businesses. ML Peekthong Thongyai, the federation’s Vice Chairman, said the FTI is closely monitoring the ongoing trend of factory closures. According to data from the Department of Industrial Works, 561 factories closed between January and May, resulting in 15,342 job losses, averaging about 3,000 jobs per month.
These included 12 plastic factories, 11 metal factories, and 8 wood processing factories. Continuing high production costs, including interest rates, are raising concerns that more closures may follow.
The FTI is urging the government to implement additional measures to support business operators. However, businesses must also adapt and find ways to reduce costs. Over the past two years, low-priced goods have flooded the market, intensifying competition.
In spite of economic trials and tribulations, Thailand is certainly not backing down without a fight. Local auto parts manufacturers are being urged to adapt to the technological disruption caused by electric vehicles (EVs) and transition to the production of medical devices, which are expected to have a promising business future, the Federation of Thai Industries (FTI) added.
The Nation quoted FTI that auto parts makers familiar with internal combustion engines (ICE) are struggling to adapt to electric mobility technology, as many of their products are no longer required by EV makers.
“We will discuss this shift with the government and hope to create new product champions in the medical field,” said Isares Rattanadilok Na Phuket, vice-chairman of the FTI. “This can become another effort to stimulate the economy.”
Transition To Medical Devices
The Nation added a cluster under FTI Mobility-ONE, which is a new unit under the federation, believes auto parts producers can transition to manufacturing medical products, including some single-use devices such as test kits to diagnose illnesses, and durable items such as wheelchairs and hospital beds. Known as CFM-ONE, this cluster was established last year to support the development of Thailand’s automotive industry and help car and auto parts companies cope with challenges in their businesses.
Up to 1,700 auto parts makers are members of the FTI. Most of them are small or medium-sized original equipment manufacturers, clkassed as Tier 2 and 3 in the auto parts supply chain. Auto parts producers in Tier 1 are usually subsidiaries of global car companies.
Manufacturers in the second and third tiers, skilled in plastic stamping and tasks involving rubber and electronics-related manufacturing processes, have the potential to pivot their operations towards the production of medical devices. According to Krungsri Research, Thai medical device manufacturers are expected to enjoy solid rates of growth from 2023 to 2025, with the value of goods distributed domestically and internationally forecast to expand by an annual average of 5.5-7.0% and 6.5-7.5%, respectively.
Markets will be lifted by a number of factors, including the aged society and the accompanying rise in rates of illnesses, the threat of newly emerging diseases, rising interest in preventive healthcare in the post-pandemic era, and growth in demand for medical tourism.
According to Krungsri Research, Thailand is recognised globally for its high quality of care and low costs. CFM-ONE said it would cooperate with global car manufacturers to assist local auto parts makers who want to continue businesses in the automotive industry in shifting to producing parts for EVs.
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