The high voltage battery production plant of BMW Group Manufacturing Thailand at WHA Chonburi Industrial Estate 2 on Sept 6. (Photo by Watcharawit Phudork)
More Chinese manufacturers are looking to Thailand as a manufacturing base to avoid US tariffs, based on trends in demand for industrial estates.
WHA Corp, the top Thai provider of such estates, said it expects Chinese companies to account for as much as half of its land sales contracts both this year and next, up from about 12% in 2018. The firm also develops industrial parks in Vietnam .
"People are moving some production," said David Nardone, chief executive of the firm's industrial-development unit, in an interview. "It will have a significant impact for Thailand and Vietnam. A drop of water for China could be a flood for us because of the different size of the economies."
Thailand has rolled out incentives including tax breaks to woo manufacturers seeking to skirt the tariffs the US and China have imposed on each other. Recent evidence suggests rival Vietnam has pulled ahead in the race to lure producers.
For instance, more than three times as many companies are planning to relocate or divert production from China to Vietnam than to Thailand, according to research by Nomura Holdings Inc.
At the same time, the value of net foreign-direct investment applications to Thailand from Chinese firms is surging. It rose five-fold in the first half of 2019 compared to a year earlier, the Board of Investment data shows.
Chinese and Hong Kong applications combined were worth about $ 1 billion, second only to Japan, whose firms have long been manufactured in Thailand.
WHA expects to add six industrial parks to its current roster of 10 in Thailand and has begun selling its space in Vietnam.
Mr Nardone sees Thailand and Vietnam as competitors, saying each has strengths and weaknesses. It takes a long time to set up plants in Vietnam, while Thailand has a labor shortage, he said.
Manufacturers appear to be moving only a slice of China's output outside of its market size, he added in a Sept. 19 interview in Bangkok.
WHA's shares have climbed about 8% this year, surpassing the 4.6% rise in Thailand's benchmark SET equity index.
Thai officials have said companies including Sony Corp, Sharp Corp and Harley-Davidson Inc are moving some manufacturing to the country.
They are hopeful foreign direct investment will help revive the export-led economy, whose growth has been slowed by currency strength, the impact of the trade war and domestic political flux.