Narong Yuenyonghattaporn, a retired civil servant in Bangkok, bought an electric car made by GAC Aion earlier this year. He is part of a growing number of Thai drivers who are buying EVs sold by Chinese car companies but made in Thailand, a country that has become one of the frontrunners in the global battle for market share.
In the past two years, Chinese automakers including BYD, GAC Aion, and Chery have announced plans to build manufacturing facilities in Thailand. The BYD and GAC Aion factories started operating in July, and so far China’s Thai auto plant industry is worth 10.4 billion dollars.
Narong’s EV is one of 80,000 battery-electric vehicles that the Electric Vehicle Association of Thailand is estimating will be registered this year. Last year, Thailand registered 76,739 BEVs, according to government data, 6.5 times the number in 2022.
Although the level of EV adoption in Thailand has slowed this year, as in many other parts of the world, it is part of a growing trend. Chinese car companies, led by BYD, are entering markets dominated by automakers from Japan, the US, and Germany. As of 2020, Chinese auto brands, especially EV manufacturers, have been expanding globally in search of more revenue as fierce competition and oversupply at home eat into their market.
But with political obstacles hindering the search for car buyers in Europe and North America, these Chinese automakers aggressively enter middle-income markets such as Thailand, Indonesia, Brazil, Malaysia, and Argentina, where there are usually no domestic car champions to defend against, and. governments have good relations with Beijing.
In Thailand, Chinese EV manufacturers are starting to challenge the Japanese brands that have been dominating the Thai auto market. Chinese brands have bought huge billboards on the highways between Suvarnabhumi Airport and Bangkok. In the city, some showrooms now display cars from China, while Chinese EV manufacturers are less than a two-hour drive from Bangkok. Once fully operational, these Chinese EV facilities could together ramp up production to build up to 320 vehicles per year.
“There are a few things that make Thailand stand out,” says Eugene Hsiao, head of China equity strategy in Hong Kong and China cars at Macquarie. “The first and obvious thing is that Thailand as a country is friendly with China. I think it is important. The second is that the auto supply chain is already well developed. This has been done very well by the Japanese in history.”
Thailand’s central location in the region makes the country a gateway to the vast Southeast Asian market, and Thailand itself has a large automotive market compared to the rest of the region, said a GAC Aion Thailand spokesperson.
As they did in Thailand, Chinese automakers are making money around the world. Led by established brands such as BYD, SAIC, and Chery, they are stockpiling cars in the country to get incentives or avoid taxes.
“Affordability is a universal value proposition.”
While Brazil has rolled back import taxes on electric cars regardless of origin, the government also has a program that encourages companies to remove carbon, and car companies may qualify for tax rebates based on the energy efficiency of the vehicle types and the amount of local production. Manufacturing in Hungary can allow Chinese EVs to bypass EU tariffs, and in Malaysia, despite local car models, the government offers tax exemptions for locally assembled EVs.
There is a clear strategy behind the choice of the country where Chinese manufacturers set up shop, says Hsiao. In this case, bigger doesn’t mean better.
“The best markets in terms of GDP per capita would be the major developed markets, meaning the US, Europe, and Japan. These markets are the most closed, you could argue,” he says – but there are “other small but meaningful markets” for Chinese car brands.
Beijing identified the EV sector as an emerging industry worthy of national support more than a decade ago, providing support to both manufacturers and consumers. There were about 500 EV companies in China at one point, but competition and the slow flow of subsidies have driven consolidation.
Traditional car manufacturers from Europe and the US are struggling to compete or match Chinese EVs offered at lower prices. That ate into their share, with Volkswagen in late October announcing plans to cut wages and close factories. Japanese automakers have also been slow to shift toward electric vehicles, and Japan’s biggest automaker, Toyota, thinks the EV transition won’t happen as quickly as expected, placing its bets on hybrids. This strategy seems to be working for Toyota so far, as it retained its title as the world’s largest automaker last year. Data from Toyota for the first nine months of this year showed Toyota sold nearly 3 million hybrid vehicles, an increase of 19.8% year-on-year.
Auto Manufacturing makes up 10 percent of Thailand’s GDP and provides about 850,000 jobs, according to the International Labor Organization. Its history and automobile manufacturing dates back to the 1960s, when Japanese manufacturers such as Toyota, Nissan, and Mitsubishi opened manufacturing facilities in the country. Before long, American and European brands followed.
From the beginning, Thailand relied heavily on incentives and taxes to transform itself into a regional manufacturing hub. It introduced an import policy – replacing imports with domestic production – for the auto industry in the 1960s, attracting foreign automakers to set up production facilities in the country.
Thailand’s trade agreement with the Association of Southeast Asian Nations, or ASEAN, also means that automakers enjoy lower import duties when selling within the region. The Thai government’s high import tax of 80% on passenger cars and 30% on pickups further encourages automakers to continue manufacturing in Thailand.
Now the Thai government is betting EVs will allow it to maintain its position as the “Detroit of Southeast Asia.”
Bangkok has a “30@30” program, with the goal of 30% of the cars produced to be EVs by 2030. In early 2022, Thailand approved a program to encourage the promotion of EV adoption in the country, with the ultimate goal of making Thailand. the area’s EV-manufacturing hub.
Tangible investments in manufacturing from Chinese companies can affect the decision-making of consumers like Narong, a retired civil servant. Because these companies have set up assembly facilities in Thailand, parts are easily available and maintenance should be easy, helping to ensure that Chinese cars are reliable. A less fractious geopolitical relationship, too, could cause buyers like him to be open to giving Chinese cars a chance.
“They also produce a lot of electric cars to serve their markets, and their government gives a full contract, and I believe this results in good experiences and reliability,” says Narong.
But these Chinese EVs are still starting to enter Thailand, they are still rivals and have not caught the car manufacturers yet. Charging concerns remain an issue that needs to be addressed, and in general, EV adoption is happening rapidly in Bangkok. In mountainous areas like Chiang Mai, the Toyota pickup can still be a popular choice.
Toyota was still the number one car company in Thailand last year with 265,949 cars sold, according to data from the Thai subsidiary, followed by Isuzu, Honda, and Ford. BYD was sixth with 30,432 vehicles sold, just 2,000 cars shy of fifth place Mitsubishi. Together, Chinese brands, led by BYD, accounted for 11% of the new-car market, more than double last year, while Japanese car sales declined. Chinese brands accounted for 80 percent of EV sales in Thailand last year.
A chart showing China’s top 10 export destinations
Thailand’s tax rebates for EVs make the country an attractive market, says a GAC Aion Thailand spokesperson. Some countries are also taxing EVs, which should increase demand.
“The ability to appreciate the value of the world,” says Bill Russo, founder and CEO of Automobility, a Shanghai-based strategy and investment advisory firm for the automotive industry.
But, Russo argues, the threat posed by Chinese automakers to automakers is more than just EVs.
Despite talk of Chinese EVs entering foreign markets, China is also selling a large number of conventional internal-engine (ICE) vehicles, he says. Russo explains that because consumers in China, the world’s largest auto market, are increasingly choosing EVs over ICEs, the country’s automakers are left with more ICE vehicles than the market can handle. This means that they are looking to unload millions of cars elsewhere. While China hasn’t had much success selling gasoline cars in Thailand, some markets are still on the fence about EVs from them.
“Sell to Russia, sell to Mexico, sell to Brazil. “Sell them wherever consumers don’t trust EVs yet,” says Russo.
China exported 4.91 million cars last year and overtook Japan as the world’s largest car exporter. Plug-in hybrids and battery-electric vehicles accounted for 25% of exports, which means Chinese brands are also selling more gasoline vehicles.
Exports to Russia still dominate, but Chinese automakers have increased their market share in Mexico, Brazil, Turkey, and the UAE, according to data compiled by Motor.
Governments are only looking at Chinese automakers through an EV lens, so ICE vehicles are still being exported without many restrictions, says Russo. This gives Chinese automakers an opening.
“You create your dealer network, you establish your brand, you have the beachhead,” Russo says. Once it is established as a reliable model, car manufacturers can start introducing EVs.
Automakers have used the same method in China, Russo says: “That’s exactly what they’re going to do all over the world; they will go to every country they can and then turn to EVs. “
This article appears in the December 2024/January 2025 issue of Fortune entitled “Changing Paths.”
