• <\/span><\/strong>After more than a year of deliberation, the United States has ruled that passenger car and light truck tires exported from Thailand will be subject to anti-dumping (AD) duties. This decision is expected to raise the prices of these tires from Thailand in the US market. While this may not significantly impact the overall value of Thailand's tire exports to the US in 2021, Kasikorn Research Center believes that the AD duties imposed could affect future investments in the tire industry and impact exports to the US.<\/span><\/p>

  • In the global automotive tire industry, Thailand is considered the second-largest production and export base after China, supported by factors such as lower costs and better quality raw materials compared to competitors, skilled labor expertise, government support, and the presence of tire testing centers in the country. This enables Thailand to produce higher quality tires than other manufacturing countries in ASEAN, attracting significant investment into the tire industry each year, especially from China, with exports reaching a value of $4.738 billion in the first half of 2021, of which 54% was exported to the US.
  • However, after the ruling that passenger car and light truck tires from Thailand will be subject to AD duties, the import costs of these tires from Thailand have immediately increased and may have a long-lasting effect for up to 5 years. This will clearly reduce the price competitiveness of Thai tires in the US market, particularly for light truck tires, which are expected to be priced significantly higher than competitors.

Average Import Prices of Passenger Car Tires Imported by the US in the First Half of 2021 (USD/Unit)<\/p>


Source: Kasikorn Research Center compiled from Trademap
*Average export prices from the US to various countries, **Kasikorn Research Center's preliminary forecast based on the imposed duty rates<\/p>

  • Since the beginning of 2021, importers of both types of tires from Thailand in the US have had to pay compensation for damages due to AD, even though the case is not yet concluded (the rates are similar to the current duties). This has resulted in a significant immediate decrease in the share of imports of passenger car and light truck tires from Thailand into the US, particularly for light truck tires, which have seen a sharper decline compared to passenger car tires. This is likely due to reduced competitive pricing, as reflected in the US increasing its share of tire imports from competitors such as Mexico, Canada, Indonesia, and Vietnam.

<\/p>

  • Nevertheless, in the first half of 2021, Thailand's exports of passenger car tires to the US continued to be supported by two main factors: (1) the low base effect from last year when the US economy was severely impacted by the COVID-19 pandemic, and (2) large truck tires, which account for over 35% of total passenger car tire exports to the US, were not subject to the AD investigation and continued to grow at an accelerating rate (the export value of large truck tires in the first half of 2021 expanded by 63% YoY). This has allowed the overall export of passenger car tires from Thailand to the US to still grow well at 20.1% YoY.

<\/p>

  • However, when comparing the total export value of passenger car tires from Thailand to the US in the first half of 2021 with the second half of 2020, when the US economy was gradually recovering, there is a clear downward trend with a decrease of 9.8% (HoH), indicating a slowdown in the export of Thai passenger car tires to the US. This has led Kasikorn Research Center to predict that the total export value of Thai passenger car tires to the US in 2021 may still have the potential to grow by no less than 2.6% or more than 2.85 billion USD, but there are still risks for exports in the coming years. Additionally, Kasikorn Research Center believes that in the future, Thailand may face more challenges in attracting investment into the production of passenger car and light truck tires for investors aiming to establish production bases primarily for exports to the US, which are mostly tires for the REM market.

• Kasikorn Research Center believes that major Japanese and Western brands may invest in tires to support the REM market in Thailand only to a limited extent, as the domestic market has not expanded significantly, while export prices have become less competitive. This may lead these major brands to choose to invest in the US or increase investments in existing production bases in Mexico and Canada, which are members of the USMCA, and export to the US instead, benefiting from the lack of import duties and lower shipping costs. Meanwhile, Chinese brands already investing in Thailand may have opportunities to increase investments and diversify exports to other markets outside the US to accelerate the creation of Economies of Scale, as Chinese tires focus on price competition, and consumer preferences in the market may not match those of major brands. This makes the distribution of production bases across multiple locations, as seen with major brands, less effective in reducing costs, especially since Thailand still has a significant strength in having a highly efficient labor force in the tire industry and relatively lower production costs compared to other production sources. However, when considering investments from new Chinese tire manufacturers for passenger car and light truck tires, Thailand may become a less attractive option as more competing countries emerge, especially those not subject to AD like Indonesia or those facing lower levels of AD like Vietnam.

• In the OEM tire market, which accounts for less than 10% of the total tire production in the country, there are still opportunities for popular tire brands targeting the OEM market in Thailand to invest further to support the increasing production of vehicles in Thailand, especially as Thailand is set to become a regional automotive production hub for exports. Kasikorn Research Center estimates that vehicle production in Thailand could rise to 2.5 million units and 3 million units in 2030 and 2040, respectively, from 1.64 million units this year, as Japanese and Western automakers have adjusted their plans to make Thailand a more significant automotive production hub for exports, as evidenced by the gradual closure of factories abroad and increased production in Thailand, along with increased investment in technology components in Thailand. At the same time, Chinese automakers also plan to gradually invest in vehicle production in Thailand to establish a right-hand drive production base for global exports. However, the direction of investment expansion may be gradual in the short term over the next three years due to the production volume being pressured by economic conditions both in Thailand and globally, which have slowed down due to the impact of COVID-19, particularly for well-known Japanese or Western tire brands.

• Looking ahead, to mitigate the impact of AD, focusing on cost reduction through increased automation in the production process may become increasingly necessary. Additionally, targeting new long-term markets such as xEV passenger car tires may help open new markets to create more investment and export opportunities.

  • Since the tires exported from Thailand to the US are primarily REM tires, consumers in this segment are generally highly price-sensitive. Therefore, reducing costs is crucial as Thai passenger car tires lose competitiveness due to rising prices compared to competitors. One approach is to use robots and automation more to reduce the number of defective products and increase the chances of achieving Economies of Scale more quickly in the long run. It is also essential to develop quality alongside to align with the necessary price adjustments, which will improve consumer perceptions of the products. Furthermore, finding alternative export markets may also be another option to help reduce the impact.
  • Moreover, in the near future, all stakeholders may need to focus more on developing tires for xEV vehicles, especially BEVs, as these tires require different properties compared to traditional internal combustion engine tires, such as reduced rolling resistance, better road grip, and increased durability due to the heavier weight of BEVs. Suitable tires will enhance the range of BEVs, as well as braking control and other functions. Thailand is also being positioned as a primary production base for BEVs in the region in the future, and the US, the world's largest tire importer, is also developing in this direction, with a goal that half of the new vehicles entering the market by 2030 will be BEVs. This indicates a significant future demand for this new category of passenger car tires, which will create opportunities to attract investments to Thailand and increase the chances of resuming exports in the future.
  • Additionally, geopolitical issues between the US and China may also affect investment directions in the future. Kasikorn Research Center believes that one approach to mitigate the impact is to expedite negotiations for free trade agreements with countries that are key markets for Thai automotive tires, both directly and indirectly.

This research report is prepared by Kasikorn Research Center Co., Ltd. (“KResearch”) for general dissemination, relying on publicly available sources or information deemed reliable at the time of preparation, which may change over time. KResearch does not guarantee the accuracy, reliability, suitability, completeness, or timeliness of such information and does not intend to solicit, recommend, advise, or persuade any decisions to take any actions. Therefore, you should study the information carefully and exercise caution and discretion before making any decisions. KResearch will not be liable for any damages arising from the use of such information.

Any information contained in this research report is the property of KResearch and/or third parties (as applicable). The use of such information (in whole or in part) must acknowledge the ownership rights of KResearch and/or third parties (as applicable) or the source of that information. You may not reproduce, modify, adapt, alter, forward, publish, or engage in any such actions for commercial purposes without prior written permission from KResearch and/or third parties (as applicable).

 <\/p>