Growth in the global electric vehicle (EV) market currently has prompted Japanese car makers to restructure their supply chains by adopting horizontal specialization. Under this strategy, they have joined forces with their partners to develop a single platform. This has benefited Thai auto parts makers overall over the first 10 years when the car market consisted largely of internal combustion engine vehicles. Due to increased investments in hybrid electric vehicle (HEV) and plug-in hybrid electric vehicle (PHEV) in Thailand, their impact on demand for engine parts will be limited. As the battery electric vehicle (BEV) market will likely be small over the next 10 years, we at KResearch project that only 2.4 percent of the engine parts value will disappear when compared to the case that there are no BEVs in the market.
However, once the production of BEV increases in Thailand over the long term, it is expected that manufacturers of engine parts, both powertrain and electric systems, will be under more pressure and this may heighten competition as a result of lower demand for engine parts. Meanwhile, since car makers can use the same engine parts under their single platform strategy to reduce costs, this will likely result in fewer number of engine parts manufacturer. Given this, KResearch views that over 22 percent of engine parts value will likely disappear from the market when compared to the case that there are no BEVs in the market.
Nevertheless, because Thailand is the first country where Japanese car makers have proactively invested in the production of EV, KResearch views that it is a good opportunity for Thailand to attract more investments in other types of EV parts in the future. If Thai engine parts manufacturers are able to upgrade their technologies so that they can produce high value BEV parts, in particular electric batteries and mortors, the impact on the Thai auto parts industry overall may look different although a substantial value of engine parts may disappear in the future.