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Auto Industry Advised to Prepare for Effects of U.S. Tariffs

Auto Industry Advised to Prepare for Effects of U.S. Tariffs

The local automotive industry is urged to prepare for the upcoming impact of U.S. reciprocal tariff measures set to begin next month, which may add further pressure to the sector, according to Kasikorn Research Center (K-Research).

The research organization indicated that U.S. President Donald Trump is committed to implementing new reciprocal tariff rates for specific industries starting April 2. This action is anticipated to heighten global trade tensions, affecting various Thai industries, particularly the automotive sector.

Burin Adulwattana, managing director of K-Research, stated that all stakeholders in both government and private sectors should closely monitor developments and devise strategies to navigate the challenging trade landscape. The think tank predicts that ongoing trade disputes will intensify competition in the global automotive market, worsening the oversupply and driving down prices. In 2024, K-Research noted that the average car price in Thailand decreased by 5.1% year-over-year.

Furthermore, Thailand’s automotive capacity utilization has been declining since before the pandemic. It fell from 77% in 2019 to 68% in 2023 and plunged to 53% in 2024. K-Research pointed out that if capacity utilization drops below 60%, mergers among auto companies become more likely.

The research center forecasts that Thailand’s manufacturing production index will continue to experience a contraction, decreasing by 1% in 2025, following declines of 1.3% in 2024 and 3.6% in 2023. Factory closures in Thailand are expected to continue, though at a slower pace. However, the scale of closed factories has increased, with the automotive and electronics sectors being among the most affected.

Between January and February 2024, three factories in the vehicle and transport equipment sector closed, the same number as the previous year. Notably, the average registered capital of these closed factories rose significantly to approximately 99 million baht per factory, compared to just 2 million baht during the same period last year, as reported by K-Research.

The think tank warned that increased uncertainty surrounding U.S. tariff measures could negatively impact exports and GDP growth in 2025. It forecasts Thailand’s economic growth to be 2.4% and export growth at 5% for the year. K-Research further highlighted that a 10% reciprocal tariff from the U.S. could reduce Thailand’s GDP growth by 0.3 percentage points, while a 25% tariff could result in a 0.6 percentage point reduction. As such, they may need to adjust the GDP growth forecast for this year to below 2.5% to account for these impacts.

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