Despite positive momentum from the trade war, Maybank Investment Bank sees a bearish FY25 outlook for Thai electronics due to the struggling Western electric vehicle (EV) sector and looming impact from the Global Minimum Tax.
The research house said in a note on Friday that most investors are cautious on the sector due to weak demand outlook and uncertainty regarding geopolitical risks.
According to Maybank, both Delta Electronics and Hana Microelectronics maintain their negative outlook for the Western EV sector in FY25.
It noted that mass EV adoption is struggling to pick up pace in the United States due to a lack of affordable choices that cater to US consumers (large cars with high range) and available EV charging stations.
Meanwhile, the European auto industry (both EV and internal combustion engine [ICE]) faces hefty competition from Chinese original electronic manufacturers (OEMs) and is mired in structural issues.
This has led certain major legacy brands to downsize their production or shutdown factories, said Maybank.
According to the research house, SVI has a bullish outlook on the trade war as it expects many OEMs to relocate manufacturing bases outside of China, as they did in 2018 (tradewar).
Meanwhile, Hana believes that the unstable geopolitical landscape, further exacerbated by the confirmation of Trump’s second term in office, will lead to subdued inventory levels from customers.
According to Maybank, comments from key Thai Board of Investment (BOI) representatives confirm its concerns that Thai electronics who qualify under the GMT Pillar II scheme
are bound to see their effective tax rates rise from current low levels, starting Jan 1, 2025.
However, the BOI has plans in place to mitigate the impact by returning 50 percent to 70 percent of the top-up tax paid as cash grants (with the rest going to the Revenue Department).
“We see this as a slight upside risk to our forecasts for Delta, Hana, and SVI,” said the research house.