Japanese automakers Subaru and Suzuki have announced the cessation of their production lines in Thailand, causing concerns in the Thai automotive industry. The primary reasons behind this decision are a continuous decline in sales over the past five years and shifting consumer behavior, with a growing preference for electric vehicles (EVs) over internal combustion engine (ICE) vehicles, which are the main products of Subaru and Suzuki.

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Krungthai COMPASS estimates that this production halt could impact Thailand’s overall car production in 2024, potentially reducing it by 5,000-6,500 units. While the overall impact might not be severe due to the relatively small production share of both companies, it serves as a warning sign of the challenges the Thai automotive industry is facing.

Krungthai COMPASS identifies the main reason for Subaru and Suzuki’s decision as their failure to adapt to the changing automotive market. This includes a decrease in demand for ICE vehicles, fierce competition from Chinese BEV (Battery Electric Vehicle) manufacturers like BYD and GWM, the ongoing US-China trade war, and the impact on ICE vehicle parts manufacturers due to the growing popularity of EVs. These factors have led to continuous losses for both Subaru and Suzuki, accumulating to 3.781 billion baht over the past five years (2019-2023), ultimately leading to their decision to halt production in Thailand.

This decision also affects related businesses, such as car dealerships, which may need to diversify by representing other car brands or seeking new business opportunities. Used car dealerships may face pressure on prices and profit margins.

This shift serves as a reminder for the Thai automotive industry to adapt and prepare for future changes, particularly the growth of the electric vehicle market, which presents both challenges and opportunities for adaptable businesses.

Krungthai COMPASS sees the closure of Subaru and Suzuki’s factories in Thailand as a warning sign of significant changes in the Thai automotive industry, especially with the increasing trend of electric vehicles (EVs). Manufacturers and stakeholders in the industry need to adapt to meet the challenges and opportunities that lie ahead.

For Manufacturers:

• Adaptation to Electric Vehicles: Traditional ICE vehicle manufacturers need to adapt and develop technologies to produce EVs or other alternative energy vehicles to meet the changing market demands.
• Competition with Chinese Manufacturers: Car manufacturers must prepare to face intense competition from Chinese EV manufacturers, who offer competitive prices and high quality.
• Business Strategy Adjustment: Manufacturers may need to review and adjust their business strategies, such as finding new export markets, collaborating with partners, or investing in new technologies to enhance their competitiveness.

For Parts Manufacturers:

• Development of Parts for EVs: Parts manufacturers need to adapt to produce parts used in EVs, which are in increasing demand.
• Reduction of Production Costs: As EVs use fewer parts than ICE vehicles, parts manufacturers may need to find ways to reduce production costs to remain competitive in the market.

For Dealerships:

• Risk Diversification: Dealers should consider representing multiple car brands to reduce the risk of relying on a single brand.
• After-Sales Service: As consumers may have concerns about after-sales service for imported cars, dealers should prioritize providing quality after-sales service to build customer confidence.
• Adaptation to the EV Market: Dealers should prepare for the sales and service of EVs, which are becoming increasingly popular in the market.

For Used Car Dealerships:

• Pricing Strategy Adjustment: Used car dealerships may need to adjust their pricing strategies to cope with price pressure from lower-priced new cars.
• Risk Diversification: Used car dealerships should diversify their inventory by purchasing cars from various brands, not relying too heavily on any single brand.

For Consumers:

• Research Before Purchase: Consumers should thoroughly research EVs and ICE vehicles to choose the right car for their needs and budget.
• Price Comparison: Consumers should compare car prices from various sources,both new and used, to get the best deal.

Changes in the Thai automotive industry are inevitable, but businesses that can adapt and seek new opportunities will be able to survive and thrive in the era of electric vehicles.

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