Bearish Outlook for Thai Electronics Market amidst Western EV Sector Struggles
Despite some positive signs in the trade war realm, Maybank Investment Bank recently shared a more cautious forecast for Thai electronics in the coming year. The key factors contributing to this bearish outlook include the struggling Western electric vehicle (EV) sector and the looming influence of the Global Minimum Tax.
In a note released last Friday, the research house highlighted that many investors are approaching the sector with caution due to an uncertain demand outlook and geopolitical risks. Specifically, both Delta Electronics and Hana Microelectronics are maintaining a negative outlook for the Western EV sector in the fiscal year 2025.
One of the hurdles impacting the mass adoption of EVs in the United States is the limited availability of affordable options that meet the preferences of US consumers, such as larger cars with extended range, as well as an inadequate infrastructure of EV charging stations. Meanwhile, the European auto industry, encompassing both EVs and internal combustion engines, is facing stiff competition from Chinese original electronic manufacturers (OEMs) and grappling with structural challenges. As a result, some major legacy brands are downsizing their production or even shutting down factories according to Maybank.
On a more hopeful note, SVI remains optimistic about the trade war, anticipating that many OEMs will move their manufacturing bases outside of China, much like they did in 2018 during the height of trade tensions. However, concerns persist as Hana points to the unpredictable geopolitical landscape, especially with the confirmation of Trump’s second term in office, which could lead to subdued inventory levels from clients.
Maybank also drew attention to comments from key representatives at the Thai Board of Investment (BOI), expressing worries that Thai electronics companies qualifying under the GMT Pillar II scheme may face a hike in their effective tax rates from the current low levels starting January 1, 2025. Despite these concerns, the BOI has devised plans to offset the impact by refunding 50 to 70 percent of the top-up tax paid as cash grants, with the remainder going to the Revenue Department. This measure is seen as a slight upside risk to the forecasts for Delta, Hana, and SVI, as per the research house.
Looking ahead, Maybank identifies virtual banking and increased spending on cybersecurity as two driving forces that could fuel growth in Thailand’s tech services sector.
In summary, while the outlook for Thai electronics may be challenged by several factors, it’s clear that a combination of cautious optimism and strategic planning could help navigate the uncertainties on the horizon.
