Bangkok: The Federation of Thai Industries (FTI) warns that the Thai automotive industry is grappling with dual challenges as the transition to electric vehicles (EVs) disrupts existing supply chains and raises concerns about automakers relocating their manufacturing bases. Maintaining existing customer bases while expanding into new ones is crucial for the industry's stability.
According to Thai News Agency, Mr. Suwachar Supakarndechakul, Chairman of the Automotive Industry Group of the Federation of Thai Industries (FTI), revealed that the Thai automotive industry is at a critical juncture due to the technological transition to electric vehicles (EVs). While sales in the first seven months of 2026 grew by 15.39%, this growth was primarily concentrated in the EV segment. Meanwhile, the traditional main production base, including internal combustion engine (ICE) vehicles and pickup trucks, is facing significant pressure, which could have a profound impact on the entire Thai economy.
The production of internal combustion engine passenger cars contracted dramatically in the previous year, particularly in July when production dropped by more than half. This resulted in the capacity utilization rate (CapU) of passenger car assembly plants falling to just 40.65%, meaning the plants were operating at less than half of their available capacity.
The increasing fixed unit costs are not only affecting automakers but also spreading to SMEs in Tier 2 and Tier 3, and supporting industries like rubber, glass, metal parts, springs, and tanned leather, which are also beginning to experience high levels of excess production capacity. Another critical issue is the "1-ton pickup truck," a core component of Thailand's manufacturing sector. Although over 520,000 units were produced in the first seven months, exports have decreased by approximately 9%. The pressure comes from both domestic purchasing power and the global market. A single pickup truck produced in Thailand uses a very high percentage of locally sourced parts (over 90%). If the pickup truck manufacturing base weakens, the supply chain, employment, and the economic value affecting more than 800,000 people will have a widespread and immediate impact.
In addition to internal challenges, Thailand also faces increasingly fierce competition for investment in ASEAN, with Indonesia and Vietnam aggressively promoting the production of hybrid vehicles and new technologies. A recent survey by JETRO found that Japanese business confidence in Thailand has declined, with only 38.7% of Japanese companies considering "expanding their business in Thailand" remaining, compared to 45.9% in Indonesia and 56.9% in Vietnam. "The Federation of Thai Industries (FTI) is closely monitoring the intensifying competition for automotive production bases in ASEAN. Both Indonesia and Vietnam are aggressively creating incentives to attract investment and the production of new car models, especially hybrid vehicles and new technologies. While we may not see a simultaneous relocation of factories yet, what we need to watch out for is that decisions to invest in new car models or increase production capacity may be redirected to other countries. If this continues, orders from Thai supplie rs could decrease, impacting SMEs and employment in the supply chain before a concrete relocation of production bases becomes apparent," said Mr. Suwat.
Ms. Pimjai Leeissaranukul, President of the Federation of Thai Industries (FTI), stated that the transition of the automotive industry to new technologies requires a balance between maintaining the strength of existing production bases and expanding into future automotive industries. This will enable Thailand to leverage its existing potential and enhance its long-term competitiveness.
Therefore, Thailand's key challenge is not choosing between existing and new technologies, but rather managing the transition to achieve balance. This involves leveraging Thailand's existing industrial base with future technologies to enable Thai businesses to adapt and become integral parts of the new supply chain. Three key solutions are proposed to drive the Thai automotive industry forward:
1. Maintain the capabilities of existing production facilities while managing the transition to new technologies in a balanced manner, especially in pickup truck production, while simultaneously fostering an environment conducive to the development and growth of future automotive technologies.
2. Accelerate the upgrading of Thai entrepreneurs and SMEs into the future automotive supply chain by supporting Thai parts manufacturers to access funding, technology, and markets, while promoting investment in machinery, automation systems, and digital technologies, and developing workforce skills (upskilling and reskilling).
3. Balance policy strategies to attract investment and increase domestic value. Investment promotion measures and tax structures should strike a balance between promoting new technologies and maintaining the competitiveness of existing industries.