Thailand, the second-largest economy in ASEAN after Indonesia, is an upper-middle-income country with an open economy. Although the years 2019 and 2020 have been significantly affected by the COVID-19 pandemic and lockdown leading to loss of consumption and jobs. The GDP growth rate in 2019 fell to 2.4% and is expected to further fall to (6.5)% in the year 2020.

This fall further expected to recover in 2021 by 3.5%. Private consumption and total investment in 2018 increased by 4.6 and 3.8% respectively. Export value grew by 7.7% while inflation averaged 1.1% and the current account remained in a surplus of 37.7% of GDP. A newly elected government, continuation of world economic growth, the expansion of government expenditures and the acceleration of public investment in key infrastructure projects are contributors to growth.

The express services are likely to become more significant in near future as Thailand’s economy becomes increasingly integrated owing to rapid growth in international trade services. Growth in E-commerce industry will drive the express delivery market owing to the rising demand of this service for B2C business segment

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Key Market Trends

Growing E-commerce Propels Demand for Logistics Services

As incomes in the ASEAN countries steadily rise, demand for consumer goods is created, with an evolved e-commerce ecosystem and increased spending of people in those countries. The second-largest economy of ASEAN, Thailand has one of the region’s highest number of internet users. There are around 57 million internet users in the country that are well versed in the use of digital technologies, mobile, and e-commerce. The expanding internet user base has made Thailand an ideal growth environment for e-commerce businesses.

The continued expansion of the e-commerce business has created a demand for logistics space and has brought significant changes in the supply chain and logistics operations in Thailand. Many courier companies have launched their cost-effective and high-quality logistics services in the country and brought domestic end-to-end delivery to the market. Many other companies have established central warehouses, along with smaller drop-off and pickup points across the nation, in order to sustain the rise in demand.

For small and medium enterprises (SME), this means greater convenience and a quicker process to deliver to their consumers, at a much lesser cost. Central Group, Aden, DHL Express Thailand, Kerry Express, Lazada, Pomelo, and Shopee, are some of the major e-commerce and logistics companies in the country. Additionally, the air freight handled at Thai airports is significantly increasing, owing to the on-going demand created by e-commerce.

In Thailand, strong growth in downloads of apps of traditional retailers, such as the Charoen Pokphand Group Co. Ltd. and The Central Group's Big C hypermarkets and Tops supermarkets, suggests that the services may now be growing in familiarity beyond the Bangkok metropolitan area, where they have largely focused on until the pandemic, increasing the scope for expansion of the freight and logistics service in the country.

Thailand’s Emerging Automotive Industry Provides Opportunities for Logistics

Thailand offers excellent investment potential as a leading automotive production base in the ASEAN region, a fast-developing region for the automotive manufacturing industry. Over 50 years, the country has developed from an assembler of auto parts and components into a top automotive manufacturing and export hub. With shipments bound for around 100 countries, Thailand is the 13th-largest automotive parts exporter and the sixth-largest commercial vehicle manufacturer in the world, and the largest in the ASEAN region. By 2020, Thailand aims to manufacture over 3,500,000 units of vehicles to become one of the top nations in the global automotive market.

The country has a presence of virtually all of the world’s leading automakers, assemblers, and component manufacturers. Automotive logistics has rapidly become one of the most important sectors in Thailand and is still continuing to grow to this day. Recognizing the importance, ANJI-NYK logistics (Thailand), a leading automotive logistics provider, offers automobile manufacturers in Thailand with end-to-end automotive logistics, which focuses on delivering finished vehicles and automotive spare parts.

Although auto exports performed badly in 2019, with unit export sales falling by 7.6% to 1.1 million vehicles, and export value by 6.3% to THB1.8 billion. This was largely a result of the global economy recording its slowest growth in a decade (only +2.9%) and the impact of COVID-19 pandemic and the US-China trade war on Thai export markets, although this also presented an opportunity for Thai players to ramp up exports of certain types of vehicles and result in an overall growth in the long term.

Competitive Landscape

The logistics market landscape of Thailand is fragmented in nature, with a mix of global and local players. According to industry sources, DHL holds a significant position in the Thai logistics market, with a foothold in air and sea freight and their expertise in 3PL services. Other global players, such as CEVA, DB Schenker, Nippon Express, Expeditors, Yusen, and FedEx, have a significant presence in the market in specific segments. Additionally, Japanese logistics companies are planning to expand their services in the market, due to the rising trade and industrial activities. The Thai manufacturing industry is dominated by global players and these global players prefer global counterparts for their logistics operations. For instance, Japanese and Korean manufacturers in Thailand bring their domestic logistics partners or prefer to tie up with service providers of the same origin.

With the evolution of Asian Economic Community (AEC), Thailand's position as a transportation hub for the Greater Mekong Sub-region (GMS) has been strengthened. This initiative has increased the country's opportunities for cross-border trades and import-export shipments. The most dominant mode of transportation is road transportation. Fierce competition is expected to occur, as professional multinational logistics companies owned by foreigners are expected to use their competitive advantage to gain significant market shares and compete with local logistics providers. To withstand the competition, domestic logistics firms have to identify the risks for their services among the neighboring countries and find avenues to manage the risks.

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