Say unique factors help Thailand keep its edge.
Local auto parts suppliers are shrugging off carmakers' threats to source more parts from outside Thailand if the proposed 300-baht daily minimum wage takes effect, says Achana Limpaitoon, president of the Thai Auto-Parts Manufacturers Association (Tapma).
Thailand's largest carmaker, Toyota Motor Thailand (TMT), earlier said the high pay increase promised by the Pheu Thai Party would raise production costs for suppliers, pushing up vehicle prices in turn. The higher sticker prices would also affect vehicle exports.
TMT president Kyoichi Tanada said sourcing cheaper parts from foreign suppliers would be unavoidable if Thailand wanted to remain competitive in car exports.
Ms Atchana admitted the higher basic wage would affect parts manufacturing costs but said the impact would not be as severe as in labour-intensive industries such as textile and garment manufacturing.
Wages in the parts industry depend on the scale of machinery used but usually do not exceed 10% of the production cost, she said.
Parts imported from other Asean members are not a concern, as each country cannot make enough even to meet demand from its own local carmakers, said Ms Atchana.
She did express concern about cheap products imported from China and India, where labour costs are lower.
But what worries parts suppliers the most are not carmakers' threats to source more parts elsewhere due to the wage hike, but rather the possibility of foreign investors shifting to lower-cost countries such as Vietnam and Indonesia.
"We're not afraid of our competitors, but we must be cautious," said Ms Atchana.
She said Thailand's skilled labour pool and the availability of supporting industries were factors that rivals cannot compete against.
Thai vehicle production currently accounts for 49% of Asean's combined volume.
Other car-producing countries are Vietnam, the Philippines, Malaysia and Indonesia.
Thai parts production accounts for most of the Asean output.
In terms of automobile production, domestic sales and exports, Thailand ranks No. 1 in Asean. Last year, the country built 1.6 million vehicles split equally among domestic and export sales.
Ms Atchana said Tapma has no plans to discuss the wage increase, but instead will follow along with the auto parts industry club of the Federation of Thai Industries (FTI), which disagrees with an outright wage hike.
The FTI is collecting feedback from its members regarding the new government's wage pledge, she said.
Thailand's auto parts industry employs 400,000 workers and the automobile industry 57,000.
Writer: Santan Santivimolnat
Position: Reporter
Source: The Bangkok Post
Published: 9/08/2011 at 12:00 AM
Newspaper section: Business