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Following the Electric Vehicle Trend: New Challenges for Auto Parts Manufacturers

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Following the Electric Vehicle Trend: New Challenges for Auto Parts Manufacturers
As electric vehicle (EV) technology gains global momentum, the production and adoption of EVs have become a key focus, especially in Thailand, which is one of the largest automotive markets in the region. This shift presents both challenges and opportunities for Thai automotive parts manufacturers as they adapt to the evolving demands of the EVs. With major automotive brands such as BMW, Mercedes-Benz, and Tesla entering the Thai market, along with leading Chinese companies (as China is the world’s largest EV market), the Thai government must establish clear policies to support the development of domestic EV manufacturing and parts production.

Why Government Support for Domestic EV Manufacturing and Parts is Essential
The global shift towards EVs is driven by environmental concerns and the need to reduce greenhouse gas emissions. Recently, on June 8, 2023, the European Union (EU) approved legislation to ban the sale of new internal combustion engine vehicles starting in 2035. This move underscores the necessity for governments, including Thailand's, to support the EV industry and local parts manufacturers. By embracing EV production, Thailand can position itself to not only address environmental issues but also stimulate economic growth through job creation, technological innovation, and investment in sustainable industries.

How Local Automotive Parts Manufacturers Must Adapt
In the highly competitive EV market, Thai parts manufacturers must adjust their production processes to remain relevant. EVs generally require fewer parts than traditional gasoline-powered vehicles, and while some components—such as body frames, suspension systems, brakes, tires, and safety features—remain similar, others are entirely different. For instance, manufacturers already producing items like chassis and brake systems may not need to make significant adjustments. However, electronic components, circuit boards, processors, and semiconductors are critical for EVs, offering a significant opportunity for companies with existing electronic manufacturing capabilities or new investors looking to tap into this market, particularly in areas where domestic production is lacking.

Increasing Competition
The competition in automotive parts manufacturing is much fiercer now than in the past, with automakers spreading production across various regions. Thailand is no longer the sole base for parts production in Southeast Asia; countries like Vietnam, Indonesia, and the Philippines are emerging as strong competitors. Additionally, Thai manufacturers must contend with Chinese manufacturers, who dominate both EV production and sales globally, creating additional challenges for the local market.

Opportunities for Domestic Parts Manufacturers
Despite the increased competition, government policies, such as tax incentives for EV-related manufacturers, and rising global oil prices, along with international greenhouse gas reduction agreements, will likely encourage a shift from traditional combustion engine vehicles to EVs. As EVs gain acceptance in Thailand, particularly among urban consumers, opportunities will arise for domestic parts manufacturers, especially as Replacement Equipment Manufacturers (REM) become a growing market. EVs require replacement components every 3-5 years, offering a lucrative market for parts producers. Instead of focusing solely on OEM (Original Equipment Manufacturer) clients, Thai manufacturers could tap into the REM market, which is expected to account for up to 70% of the total EV market value.

Thailand’s automotive industry stands at a crossroads, and with the right policies and investments, the country can secure its position as a leading hub for EV parts production, both for local use and export to global markets.

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