BANGKOK – The arrival of the ASEAN Economic Zone (AEC) in 2015 is expected to revolutionize the way the 10-member Association of Southeast Asian Nations does business.

For the automotive industry, it will entail careful planning. For Thailand in particular, as the barriers come down, the automotive powerhouse will have to adapt to retain, let alone strengthen, its leading position.

With the region’s biggest supply chain, Thailand’s auto makers and parts makers will have to adjust their game plans.

This was the subject under discussion at the recent Autosummit 2012 here, one of the key annual events on the Thai automotive calendar that this year discussed where the Thai automotive supply chain will find itself after 2015.

Setsuo Iuchi, president of the Japanese External Trade Organization (JETRO) in Bangkok, is upbeat about Thailand’s strengths on the road to the AEC. “The business environment is very attractive (and) infrastructure is well-developed,” he says. “Production is expected to reach 2.2 million (vehicles) or even more (this year).”

In preparing for the coming economic zone, developing a highly skilled workforce is important for Thailand, Iuchi adds. JETRO, for example, is helping develop human resources here as well as pushing research-and-development growth. “Japanese expats are coming to Thailand to train Thai trainers,” he says.

Atchaka Sibunruang, secretary general of Thailand’s Board of Investment, says investor confidence hasn’t diminished in the flood aftermath. The number of project applications the BOI received in the first five months of this year jumped 27%, while overall auto industry projects grew 25% to 176.

The total amount invested in the country rose 45%, although the auto sector lags in this respect, up slightly to 62 billion baht ($1.96 billion), she says. However, annual vehicle capacity is set to reach 2.675 million units in 2012, comfortably ahead of production projections.

But while 2012 is proving a promising year, Atchaka is concerned the financial situation in Europe could have a negative impact. “Thailand should closely watch the situation in Europe, as the European Union is the No.3 export partner for Thailand,” she says.

The EU accounts for almost a tenth of overall Thai exports, and that is growing, which makes the current uncertainty in the eurozone critical to the country’s economic future.

However, Atchaka believes investors “can be confident in Thailand’s economic strength,” as the country now is back to full vehicle production following the floods.

“The setback caused by last year’s floods was only temporary,” she says. Vehicle production is back to 100% of capacity. And although auto parts are at 80%, they “will be back to 100% by the third quarter. The auto industry is a vital sector for the country’s economy,” with total production expected to surpass 2 million units in 2012.

The country’s medium-term policy aim is to become one of the world’s top 10 automotive producers by 2014, Atchaka says, noting the sector is “very robust” and benefits from a “comparatively low-cost yet experienced workforce.”

Yet, Atchaka foresees Thailand’s focus shifting away from a low-wage economy and toward more-advanced technology, efficiency and improved skills. Indeed, electronic components are growing in importance here, she notes.

To force greater productivity and output, the government is fostering the development of “clusters.” Thailand for some time has promoted itself as a global hub for pickup production and hopes to match that success with low-cost, fuel-efficient eco-cars.

Government now is looking towards the next product champion, Atchaka says – be it trucks, vans, electric vehicles or large motorbikes.

Thailand’s other strengths are position and infrastructure. As well as the auto hub of ASEAN, “Thailand will be (the) logistics hub,” she predicts.

Ninnart Chaithirapinyo, vice president-Toyota Motor Thailand, says the AEC will bring about change in the industry’s priorities, “from allocation to competitiveness.” He also suggests ASEAN countries “consider sharing and developing resources.”

Explaining more fully, Chaithirapinyo predicts the arrival of the AEC will see a shift toward specialization, such as pickups and eco-car production in Thailand, multipurpose vehicles in Indonesia and SUVs in Malaysia, thus forcing change on the supply chain. He also points to a “need to focus on languages and IT.”

Achana Limpaitoon, president of the Thai Auto Parts Manufacturers Assn. is confident that Thailand’s AEC groundwork has been laid, noting that “2012 will be the golden year for auto parts and for the auto industry. We have rapid growth (and) strong support by the government,” she says.

In terms of upcoming challenges, Limpaitoon, along with the other key speakers, points to the workforce. “Thai people are weak in language skills,” she explains, while also revealing Tapma is projecting worker shortfalls. “The gap will be nearly half a million (by 2020).”

Limpaitoon also sees R&D as an issue: AEC will have to look at “how we can join hands and how we can compete outside ASEAN.”