Employment in Thailand’s automotive and auto parts industries as well as car financing services is declining as domestic car sales have been sluggish for months, with the latest job cuts by Nissan Motor adding to the misery.
These businesses have gradually laid off workers, which will lead to higher unemployment rates, said Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry (EconThai).
He was speaking after the Japanese automaker Nissan Motor said it would cut or transfer 1,000 jobs in Thailand under a plan to scale down production in Southeast Asia, according to Reuters, citing sources who requested anonymity.
A Nissan spokesperson declined to comment on the workforce reduction, saying only the company was partially consolidating two factories in Thailand to upgrade equipment but has no plans to close them.
Nissan announced in early November it plans to cut 9,000 jobs and reduce global manufacturing capacity by 20% to deal with the sales drop in major markets, especially China and the US, according to media reports.
Total car sales in Thailand have dropped significantly due mainly to consumers facing difficulties in obtaining auto loans, according to the auto industry club of the Federation of Thai Industries (FTI).
The downturn prompted the club to consider whether it will cut its total car manufacturing target for the second time this year.
In July, the club downgraded its production target to 1.7 million vehicles, down from 1.9 million.
“The Thai automotive industry is strongly affected by banks and financing companies’ stricter criteria to grant auto loans for fear of non-performing loans,” said Mr Tanit.
Household debt is expected to decline in the final quarter this year as economic growth strengthens, according to Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for the club.
Though the Bank of Thailand said total household debt represented 89.8% of GDP in the second quarter, down from 90.8% in the first quarter, the debt-to-GDP ratio remains high, affecting banks’ decisions to grant loans.
A shift in technology from internal combustion engines (ICE) to electric vehicles (EVs) also has had a negative impact on auto parts makers, who are familiar with making components for ICE cars, said Mr Surapong.
This does not mean EV manufacturers can easily rake in revenue, as stronger competition has led to a price war among some EV brands, causing buyers to delay their purchases to wait for prices to decrease further.
Mr Tanit expects the central bank and commercial banks to jointly work to relax lending criteria to help curb the increase in unemployment rates in the automotive and auto parts industries as well as car financing services.
There are 700,000 to 800,000 workers in the automotive, auto parts and electronic component supply chain in Thailand, according to the FTI.
Despite a drop in hiring in automotive and related businesses, the overall employment rate in the industrial sector between January and October rose by 5% year-on-year to 93,714.
During the same period, the number of unemployed workers totalled 400,000, representing 1.8% of registered workers.
These unemployed workers fall under Section 33 of the Social Security Act, which refers only to employees who had been working for companies. The figure does not include freelancers.
Thailand has about 38 million employees registered with the government, including both Thais and workers from neighbouring countries.