“Thailand’s Auto Export Problem” (Asianometry, 18 February 2022)
Perhaps this episode on Thailand’s automotive industry is best watched together with the previous episode on Australia’s automotive industry for viewers to compare and contrast what these two countries have in common, that threaten (or in Australia’s case, threatened) the viability of their car-making industries in the long term. The industry in Thailand began in 1960 with the Industrial Promotion Act that pushed foreign firms to avoid punishing tariffs on their car exports to Thailand by establishing local factories. Initially the industry concentrated on assemblage of imported car components and parts; but further government policies pushed the firms to make more and more components locally. At one point the government proposed to limit the number of low-value-added domestic assemblers by limiting the number of models and imposing entry conditions on new entrants into the industry: such proposals could have enabled the government to consolidate a number of small domestic assemblers into a large local company able to take on and compete with the larger US firms like GM and Ford, and Japanese firms like Honda and Toyota.
Over subsequent decades the Thai government attempted to encourage more local assemblage and to foster businesses supplying components and parts to the car industry by setting quantity key result deadlines – but without setting equivalent quality key result deadlines. The Thai government requirement that cars have 50% locally made components forced many smaller assemblers out of the industry, and also led to GM and Ford leaving Thailand. From then on, Japanese investment in the car industry increased.
In the 1990s the Thai car industry became increasingly liberalised with the gradual dropping of tariffs and other protections. South Korean cars entered the Thai market. The 1997 financial crisis affected Thailand hard and Bangkok responded by dropping the local parts requirements, this change coming in 2003. The fall of the Australian car industry benefited Thailand as Australia became one of Thailand’s largest markets.
Although the Thai car industry currently looks healthy, the industry is dominated by US and Japanese corporations, and all major decisions that might affect the direction of the Thai car industry are made outside the country – in the US and Tokyo. If the Thai government had encouraged a local large car-maker to emerge from the consolidation of smaller assemblers back in the 1960s and early 1970s, the country would have a local maker able to compete with the larger foreign firms that set up shop in Thailand. As the narrator notes, the Thai government should have invested in research and development with an emphasis on local engineering and the acquisition of technical skills that would encourage innovation and the local exploitation of innovative products and processes. Unfortunately for much of Thailand’s recent history, the country’s politics has not been stable and government policies have not been consistent as a result.
The country now finds itself in the so-called “middle income trap” in which rising labour and other costs of production erode Thailand’s competitive edge. Thailand’s middle class is a rapidly growing sector increasingly acquiring a taste for the good life and the goods and services that enable that life, and Thai government policies increasingly need to emphasise education, especially technical and engineering education, and the infrastructures that support such education.
As always in Asianometry’s mini-documentaries, there is a lot of detailed information for viewers to digest and the rapid voice-over narration that rarely pauses does not help in this respect. Historical film, graphs, photographs and video snippets of urban life in Bangkok and other cities provide visual interest.