Thammasat University and Chiang Mai University joined forces to study the effect of EV replacing the gasoline-powered car production line. Researchers say by supporting EV, downsides would outweigh the advantages. Auto parts manufacturers have to adapt, and the government has to be cautious and measured about supporting the EV.
Faculty of Commerce and Accountancy Thammasat University, Faculty of Engineering Chiang Mai University and The Federation of Thai Industries with the support from Thailand Science Research and Innovation (TSRI) carry out “Risk Analysis of Supply Chain of Electric Vehicle Production for Developing Support Policy and Preparing Thai Automotive industry for the Change”. The team proposes guidelines for the government: 3S Support, Subsidize, and Spread awareness, and for the private sectors are Develop, Adjust Adapt and Devote. Assoc.Prof.Dr.Ruth Banomyong presents the background and importance of the investigation to Assoc.Prof.Dr. Apichat Sopadang and general audiences from the public and private sectors.
This research project started from 15 January 2019 to 14 January 2020 (1 year). The researchers collected the data from 75 domestic and international organizations such as automotive and auto parts groups, public and private sectors as well as educational institutions. Then simulate the possible situation and analyze economic risk to the Thai automotive industry.
The results are divided into two parts: Normal situation and the case where transitioning to EV is supported by the government’s policies. The effects and risks are separated in two periods: The first 1- 5 years and 6-10 years.
3S: Support – Subsidize – Spread awareness
The research team and informants agree that in the future, the electric vehicle will replace gasoline-powered cars. So, the government should prepare the country for the change and there should be a flexible policy because it is an inevitable and unpredictable change, given the constant advancement in technology.
There should be a policy that supports the private sectors’ adaptation such as providing research funds for developing the electric vehicle, granting business income tax exemption, and supporting them to broaden and spread the knowledge and technology about electric vehicles. So, our automotive industry country can remain one of the leading car manufacturers.
Apart from supporting policy, there should also be a recovery policy that lessens the effects of the transition such as promoting manufacturing and exporting auto parts, and there shouldn’t be policies that could affect the gasoline-powered car business, for example, increasing gasoline or gas-powered vehicles taxes.
The result suggests auto parts manufacturers would suffer.
There are both positive and negative results. For the positive effects, in normal circumstances (No support by government’s policy), the automotive industry will have more auto parts manufacturers with an average net worth of 2,374 million baht in the first five years and the number will increase to 7,588 million baht in 6-10 year. The increase would be the result of an increase in the number of EV parts manufacturers.
The negative effects on auto parts manufacturers are calculated to be around 4,579 million baht in the first 1-5 years. The number will increase to 14,650 million baht in 6-10 years because there will be less demand for gasoline-powered car parts like powertrain, gear, shaft, air intake, piston, and turbocharger. Manufacturers of these are the group that will suffer the most.
So, in total, during 10 years there would be over thousands of baht loss in industrial value, and the number would double with the government’s support policy and the study suggests there could be over 20,000 million baht in 10 years.
The negative is going to be terrible especially on the employment situation. In normal circumstance, there will be over 3,000 people find themselves unemployed and over 10,000 with the policy supporting EV.
The research team strongly suggests the government should be cautious before introducing any supporting policy, and the research team also proposes some possible elements to put in the policy promoting EV.
The government can do many things to raise awareness about hybrid cars and EV, for instance, exempting excise tax, EV owner personal income tax, share the knowledge of transitioning from gasoline-powered cars to EV, investing and supporting the infrastructure to prepare the city for EV. More than that, they also should think about updating the law and supporting C.A.S.E.-Connected, Autonomous, Sharing, and Electrification
Currently, the Thai automotive industry business valuation is around 2 trillion baht per year coming from the capability to manufacture and export around 2 million cars in one year. As a result, if our industry was not ready by the time the EV society is here, we wouldn’t be able to meet the demand and would see our market value erased.
Not to mention gasoline and lubricant, the big markets in Thailand, would be affected as well, and there will be an increasing demand for electricity. With the current situation, we would have to figure about how can save those businesses and how we are going to supply the electricity for everyone. (The research team doesn’t have the data about the electricity situation.)
In conclusion, it is widely accepted that EV will be replacing the motor car in the future. EV is only one step away since the only thing they are still working on is the battery technology that could support the car as good as the gasoline-powered motor. Should that day come, and Thailand is still not ready for the change, unfortunately, we would be left behind and lose the place as the leading manufacturer. The automotive industry is one of the driving forces of the country and to lose it would be really bad in our economic situation.
Comparing to the rest of the world, Thailand ranks in 12th on the list of car manufacturers. In 2017, we produced about 1.98 million cars, making the automotive industry a very important industry for the country’s economy. It is over 5.8% of the country’s GDP and generates over 9.2 hundred-million-baht income from exporting in cars, car parts, and other related goods which is 12% of total export value.
According to the Thailand Automotive Institute, there are over 1,800 entrepreneurs and 7.5 hundred thousand employers in the Thai automotive supply chain. 21 entrepreneurs are in car assemble business, 720 are Tier-1 auto part manufacturers (Only 33% are Thai companies), and 1,000 of which are Tier-2 and Tier-3 auto part manufacturers (Most of them are Thai SME companies). The entrepreneurs in the supply chain still have an opportunity to grow with the help of Local Content Requirements policy and the increasing demand from both in and out of the country.
With the ever-advancing technology and environmentally friendly trends, the automotive industry is already steering in the direction of Next-Generation Automotive, including the alternative energy-powered vehicles like Electric Vehicles (EV) and Plug-in Hybrid Electric Vehicles. Thailand is aiming to be the biggest manufacturing country in the region. Currently, we are in the process of pushing the electric vehicle to be our 3rd product champion by supporting the S-Curve car manufacturing under Thailand 4.0 policy: innovation and technology. The government aims to have 1.2 million electric vehicles registered by 2036.
In the Original Equipment Manufacturer (OME) market, EV will affect current entrepreneurs in the supply chain as well as attract new entrepreneurs into the supply chain. Because not only there will be an increase in the auto part for the EV, there will also be high demand for software for Autonomous Driving, Shared Mobility, Connected Mobility to meet a more complex consumer behavior.
Policymakers, related private sectors, entrepreneurs and education institutes came together to stimulate and analyzing the risk and the situation in this project: “Risk Analysis of Supply Chain of Electric Vehicle Production for Developing Support Policy and Preparing Thai Automotive industry for the Change”. This project provides information making the policy in the time of transitioning to EV and making a suitable policy for the next page of the Thai automotive industry.