Kasikorn Securities (KS) has projected that the recent U.S. decision to impose higher import tariffs on automobiles could lead to a decrease in car production by approximately 1.5-2%. This follows President Donald Trump’s announcement yesterday of a 25% tariff on cars imported into the United States, expected to take effect on April 3, 2025.
In 2024, Thailand exported about 10% of its total automobile production to the United States, accounting for 7% of its total car production. Key players in the automotive parts sector, AAPICO Hitech (SET: AH) and Somboon Advance Technology (SET: SAT), generate the majority of their revenue from manufacturing automotive components, such as chassis and engine parts, for major Japanese automakers like Toyota, Isuzu, and Mitsubishi. These parts are used in complete vehicle exports as well as for domestic sales.
Based on the assumption that car production for U.S. export decreases by 25%, the revenues of AH and SAT are expected to be similarly affected, with profits potentially declining by about 5-10%. Furthermore, the tariff increase may indirectly heighten competition in other export markets.
Recommendation
The outlook remains “Negative” for the automotive parts sector. The new import tariffs are anticipated to create a negative sentiment towards the automotive parts manufacturers. Year-to-date car production figures have decreased by 19% year-on-year, affecting both domestic sales and exports, resulting in a negative outlook for companies like AH and SAT.
A potential factor that might renew interest in the automotive industry would be government policies aimed at boosting domestic car sales, although there is currently no clarity on this matter.
