Employment in Thailand’s automotive and auto parts sectors, as well as car financing services, is on the decline due to sluggish domestic car sales. The recent job cuts by Nissan Motor have further exacerbated the situation.
Companies in these industries have gradually reduced their workforce, contributing to rising unemployment rates, according to Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry (EconThai). His comments came after Nissan announced plans to cut or relocate 1,000 jobs in Thailand as part of a strategy to scale back production in Southeast Asia, as reported by Reuters.
A Nissan spokesperson refrained from discussing the workforce reduction specifically, stating that the company was partially consolidating two factories in Thailand for equipment upgrades but had no plans to close them.
In early November, Nissan announced it would eliminate 9,000 jobs and reduce global manufacturing capacity by 20% in response to declining sales in major markets, especially China and the US.
Total car sales in Thailand have dropped significantly, primarily because consumers are struggling to secure auto loans, according to the auto industry club of the Federation of Thai Industries (FTI). This downturn has led the club to reevaluate its total production target for the year.
In July, the club lowered its production estimate to 1.7 million vehicles, down from an earlier forecast of 1.9 million.
Tanit emphasized that the Thai automotive industry is heavily impacted by banks and financing companies enforcing stricter criteria for auto loans due to concerns about non-performing loans. Surapong Paisitpatanapong, vice-chairman of the FTI, noted that household debt is anticipated to decline in the last quarter of the year as economic growth picks up.
Despite the Bank of Thailand reporting that total household debt was 89.8% of GDP in the second quarter—down from 90.8% in the first quarter—the elevated debt-to-GDP ratio continues to influence banks’ lending decisions.
Additionally, the transition from internal combustion engines (ICE) to electric vehicles (EVs) has posed challenges for auto parts manufacturers who are accustomed to producing components for ICE vehicles. Surapong pointed out that this shift does not guarantee easy revenue for EV manufacturers, as increased competition has sparked a price war among certain EV brands, prompting potential buyers to delay purchases in hopes of further price reductions.
Tanit expects that the central bank and commercial banks will collaborate to ease lending criteria to address rising unemployment in the automotive and auto parts sectors, as well as in car financing services.
According to the FTI, there are between 700,000 and 800,000 workers employed in the automotive, auto parts, and electronic component supply chain in Thailand.
Despite sluggish hiring in automotive and related industries, overall employment in the industrial sector increased by 5% year-on-year, reaching 93,714 from January to October. During this same period, around 400,000 workers were reported as unemployed, equating to 1.8% of registered workers. This figure pertains solely to employees covered under Section 33 of the Social Security Act, which does not include freelancers.
Thailand has approximately 38 million registered employees, encompassing both Thai citizens and workers from neighboring countries.
