Thailand Auto Parts Sector Faces EV and Wage Pressure

Thailand’s auto parts industry is showing signs of recovery in 2025 after a sharp downturn in 2023, when production and sales fell by around 30 percent, forcing more than 10 manufacturers to shut down.

The Federation of Thai Industries’ Autoparts Group credits the rebound to rising pickup truck and hybrid vehicle sales, though structural challenges remain. The decline was triggered by high household debt, stricter lending policies, and a rapid shift toward electric vehicles (EVs). Chinese EV makers, now dominant in Thailand, have largely avoided integrating with local suppliers, bypassing decades-old networks and leaving traditional manufacturers struggling. Even large firms like Kitagawa (Thailand), with 2.56 billion baht in registered capital, were forced to close in 2023.

Key Highlights

• Thailand’s auto parts industry shrank 30 percent in 2023, now rebounding
• Chinese EV makers bypass local suppliers, disrupting supply chains
• Rising wages push manufacturers to consider relocating to Vietnam/Indonesia

This disruption illustrates how technological change can reshape supplier relationships, undermining long-established industry linkages. At the same time, Thailand’s competitiveness as a manufacturing hub faces new risks from rising wages. Daily wages have climbed from 300 to 400 baht, with government targets of 600 baht. These costs, combined with regional competition, are driving Japanese carmakers and other OEMs to consider shifting production to lower-cost bases in Vietnam and Indonesia.

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The stakes are high: Thailand’s automotive industry supports over 1.5 million jobs and contributes 10–11 percent of GDP. Cost-cutting measures such as contract terminations and reduced overtime highlight the strain on manufacturers. The recovery in hybrid and pickup truck demand provides short-term relief, but long-term sustainability will require adaptation to EV supply chains and cost pressures.