Thai labour market hits brakes as factories cut jobs amid car sales slump
The Thai labour market is in turmoil as major factories announce sweeping layoffs, with reports that Nissan plans to slash or relocate more than 1,000 workers.
This news compounds an already grim employment landscape, as highlighted by the National Economic and Social Development Council (NESDC), which reported unemployment figures rising to 414,000 in the third quarter, up from 401,000 last year.
The closure of 667 factories and the resulting loss of 17,674 jobs in the first half of the year is just the beginning, with more shutdowns likely in the latter half.
Factors such as an anticipated minimum wage hike and slumping domestic car sales have exacerbated the employment crisis, while policies encouraging mass transit could further squeeze auto manufacturers.
According to Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), the manufacturing sector, particularly the automotive industry, is under intense pressure. Competition with low-cost Chinese imports has local manufacturers struggling to keep up.
The Office of Industrial Economics underscores this issue, linking cheap imports to a drop in the Manufacturing Production Index (MPI), which fell 0.91% year-on-year in October to 93.4 points, as capacity utilisation dwindled to just 57.7%.
Plant closures
Kriengkrai explained the knock-on effects.
“Many companies decided to cut overtime expenses, reduce work shifts, and even trim working days. This affects capacity utilisation and employment, especially in the car and auto parts industries.”
The FTI anticipates continued job cuts and even potential plant closures. Despite 1,009 new factory registrations this year, job growth hasn’t kept pace. The automotive sector has borne the brunt, with Thailand’s car manufacturing output dropping 19.2% in the first ten months compared to last year.
Japanese automaker Nissan is reportedly planning to cut or transfer 1,000 jobs in Thailand as part of a strategy to scale back production in Southeast Asia. This follows Suzuki Motor Corporation’s June announcement to shut its Rayong plant by 2025, a pivot towards importing electric vehicles to Thailand.
Nissan Motor (Thailand) President Toshihiro Fujiki apologised for the job losses.
“We are sorry for this workforce reduction news. The company needs to improve its work structure for more efficiency. We hope everyone will understand as we continue to develop new products to boost sales.”
Electric vehicle production
The shift to electric vehicle production has further fuelled layoffs, as traditional combustion engine vehicle output plummeted 28.3% in the first nine months. Danucha Pichayanan, NESDC secretary-general, pointed to technological changes and digital skill gaps affecting job markets.
“The switch to electric vehicle production has impacted workers, as internal combustion engine output plummeted, leading to layoffs.”
Bangkok Post reported NESDC’s third-quarter figures reveal a slight dip in overall employment, with agricultural jobs dropping 3.4%. Manufacturing employment began its decline in late 2023, driven largely by technological advances.
Meanwhile, not all sectors are suffering. The hospitality industry has blossomed, seeing a 6.1% rise in hotel and restaurant employment thanks to a surge in tourism in key destinations like Phuket, which has seen hotel occupancy soar.
However, the retail sector faces challenges due to high household debt and global uncertainties. Industry leaders like Supawut Chaiprasitkul of The Mall Group remain optimistic, focusing on adapting to evolving business climates to avoid layoffs.
The IT sector presents a mixed picture, with booms in cybersecurity and cloud computing offsetting maturity in some global tech firms. The local cybersecurity scene has seen double-digit growth amidst rising cyber-attacks.
Global economic shifts
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, stressed the importance of adaptation amid global economic shifts. While backing the government’s minimum wage increase, he warned that timing is critical given the costs businesses face.
As Thailand grapples with these multifaceted challenges, the looming minimum wage hike and declining car sales continue to put immense pressure on the nation’s employment figures, threatening various sectors.
What Other Media Are Saying
- Bangkok Post highlights Nissan’s job cuts in Thailand’s automotive sector amidst a sales slump, urging banks to relax lending criteria to prevent rising unemployment and bolster economic stability. (read more)
- The Thaiger reports Thailand’s auto industry is struggling with production forecasts downgraded to below 1.7 million units for 2024, amidst declining domestic sales and export challenges exacerbated by economic uncertainties. (read more)
Frequently Asked Questions
Here are some common questions asked about this news
Why is Thailand’s automotive industry facing such intense competition from Chinese imports?
Chinese products are exported cheaply, making it difficult for local manufacturers to compete on price, impacting Thailand’s automotive sector.
How might Thailand’s shift to electric vehicle production influence the future of its labour market?
The shift could lead to job losses in traditional manufacturing, necessitating workforce reskilling to align with new technological demands.
What if Thailand’s government doesn’t support workers’ adaptation to new technologies in the automotive sector?
A lack of support could lead to increased unemployment and hinder economic growth as industries evolve toward modern technologies.
How could Thailand’s hospitality sector mitigate the challenges faced by other industries?
By leveraging tourism growth, the hospitality sector could absorb displaced workers, offering new employment opportunities amidst industrial decline.
Why is the timing of Thailand’s minimum wage hike critical for businesses?
Timing affects businesses’ ability to manage increased costs, especially during economic challenges, which could further impact employment figures.
