In the past 2 to 3 years, the automobile industry has awakened to the realization that the era of electric vehicles (EV) is coming, resulting in a massive restructuring of the automotive part supply chain worldwide, including Thailand, in 2 aspects; the internal combustion engine (ICE) supply chain and the new supply chain that produces key components specifically for electric vehicles.
One of the anticipated changes in the auto part supply chain for ICE-propelled vehicles is the shortened supply chain of existing auto component production as automakers are trying to develop a common platform for vehicles to enhance their competitiveness. Moreover, producers of some traditional auto components may have to modify certain qualifications to make their products EV compatible such as braking and gear systems.
The new supply chains that produce key EV parts, which are not used in ICE-driven engines, such as car batteries, power inverters and on-board chargers, have usually been concentrated in developed countries, which own technology and serve as EV production bases, namely, Japan, China and Germany. However, they have begun investing in Thailand to transform Thailand into another production base for their EV part production to support the EV production industry for the local market and exports. As a result, the Thai automotive supply chain will be elevated to the production of hi-tech parts, moving it up the value chain. It can also be linked to other related industries, especially the electronics industry that is playing an increasingly prominent role in the automotive part supply chain.
Such change will inevitably affect part manufacturers in Thailand; tier-2 auto part producers are expected to be impacted more than others. There are around 600 tier-2 auto part producers in Thailand, half of them are Thai companies. The trend is likely to lead to stronger competition and mergers & acquisitions which should be clearly evident after 2027. Nonetheless, the extent of the impact on each company will depend on individual ability to adapt to changes.