China-led EV boom in Thailand threatens Japan's grip on key market
Technology
Electric vehicles growing rapidly as proportion of car sales in the country
BANGKOK (Reuters) – Thailand's Siam Motors partnered with Nissan Motors in 1962 with a factory that rolled out four cars a day, leading to a profitable, decades-long relationship with Japanese companies that transformed it from a car dealer to an automotive pioneer.
But the Thai family-owned group that has grown annual revenues to $7 billion on the back of that success is now looking at opportunities elsewhere.
Siam Motors is in talks with several Chinese automakers about potential partnerships, particularly for high-end electric vehicles, vice president Sebastien Dupuy said in an interview, referring to previously unreported discussions.
"EVs will be a nice pocket of growth," he said. "There is a market growing for that, and we want to capture the growth."
Siam Motors' position reflects a rapid shift underway in Thailand, where Chinese investments worth $1.44bn since 2020 – including by BYD and Great Wall Motor – have opened a new front in a market Japanese automakers historically dominated.
Close on the heels of a sales crisis in China, Japanese automakers now face a battle for another key Asian market because of what has been a go-slow approach to EVs, according to registration data, industry officials and analysts.
The Chinese wave is already beginning to reshape Thailand's auto industry, as EV makers from China bring in their suppliers and local Thai firms - including those with longstanding links to Japanese companies, like Siam Motors - seek new partnerships.
Thailand is Southeast Asia's largest car producer and exporter, and its second-largest sales market after Indonesia. Japanese automakers are so dominant that for decades they have treated it almost as an extension of their home market.
But China surpassed Japan as Thailand's top foreign investor last year, boosted by BYD's investment in a new plant set to start up in 2024, amid concerted efforts by Thai officials to draw Chinese EV producers.
Thailand's transition offers a test case for other economies as Chinese automakers ramp up exports and build overseas production hubs, partly in response to a hypercompetitive home market for electric cars.
In Europe, for example, where policies to support local EV production are still taking shape, Chinese automakers are also making a major push in a market where EVs now account for almost a fifth of overall sales.
CHINA VS JAPAN
Bangkok resident Pasit Chantharojwong drove a Toyota Corolla for a decade and a half before switching to Great Wall's Ora Good Cat this year.
"I'll never go back to a combustion-engine car again," said the 55-year-old teacher, who also drives part-time for a ride-hailing service.
Of the nearly 850,000 new cars registered in Thailand last year, only around 1pc were EVs, according to government data. But between January and April this year, that proportion rose to more than 6pc.
BYD is now the market leader, followed by China's SAIC and Hozon and US automaker Tesla, according to registration data showing 18,481 EVs sold between January and April.
More than 7,300 of those were BYD cars. Only 11 newly registered EVs this year came from Toyota, Thailand's dominant brand that along with its partner Isuzu and Honda accounted for almost 70pc of overall car and truck sales last year in Thailand.
Hajime Yamamoto, a principal at Nomura Research Institute's consulting division in Thailand, said Chinese brands could take at least 15 percentage points of share from Japan over the next decade by delivering affordable EVs.
"The Japanese are only able to target some of the premium segments," Yamamoto said.
Toyota, which alongside its group companies has invested nearly $7bn in Thailand over the last decade and employs some 275,000 people, told Reuters in a statement that it is considering EV production in the country - its first official confirmation.
Toyota said it has taken 3,356 bookings so far for the electric bZ4X, which it began selling in Thailand last year.
It has also signalled an electric pickup truck is coming, but Goldman Sachs said in a note last month that "there is a growing need for them to consider other product segment expansion."
GOVERNMENT PUSH
By 2030, Thailand aims to convert around 30pc of its annual production of 2.5 million vehicles into EVs with ambitions to become the main regional production hub, for which it is aggressively pursuing investment.
Thailand's pitch to Chinese EV makers has been its existing supply base – built largely for Japanese automakers – and readiness to provide incentives.
These include lower tariffs on imports on the condition of subsequent local assembly and some tax breaks for EV manufacturing.
"We realise that if we would like to be the EV hub of the region, we cannot only build the car assembly industry," saidThailand's Board of Investment Secretary General Narit Therdsteerasukdi, who has travelled multiple times to China in recent months.
"We need to strengthen the whole ecosystem of EVs."
The BOI has approved 14 projects by 13 companies, representing an annual production capacity of 276,640 EVs as of May 31.
Great Wall selected Thailand as a regional hub for EVs because of the country's strong infrastructure, supplier and talent base, alongside its growth potential, said Narong Sritalayon, managing director of its Thailand arm.
"You want to penetrate into a market that has purchasing power and will be able to support your growth plans in the future, especially in a new business like electric vehicles," he said.
INVESTMENTS UNDERWAY
China's Great Wall Motor made an early punt on Thailand in 2020 when it acquired a factory from General Motors, where it will spend 22.6bn baht ($647.38m) turning it into a regional production centre for EV and hybrid cars.
The automaker will start producing its popular compact Ora Good Cat EV in Thailand next year, and is also bringing in its subsidiaries MIND Electronics, HYCET and Nobo Auto that make electronics, powertrains and seating.
Chinese rival SAIC Motor, which owns MG Motor and has a partnership with Thai conglomerate Charoen Pokphand Group, launched its first EV in the country in 2019.
It is investing 500m baht to expand its existing plant for EV parts and battery manufacturing, the company said in April.
Chinese EV giant BYD is investing 17.9bn baht to set up a new facility in Thailand that will start producing 150,000 passenger cars per year from 2024, some of which will be exported to Southeast Asia and Europe.
China's Hozon New Energy Automobile is also working with Thailand's Bangchan General Assembly to locally produce the electric NETA V model starting next year.
IN THE PIPELINE
Several deals are also in the pipeline, according to the Thailand Board of Investment (BOI), which has been pursuing Chinese automakers.
State-owned Chongqing Changan Automobile, which has partnerships with Ford and Mazda, will invest 9.8bn baht to set up its first right-hand drive EV factory outside China, according to the BOI.
GAC Aion, a subsidiary of state-owned automaker Guangzhou Automobile Group (GAC) is planning to invest more than 6.4bn baht to produce EVs in Thailand, the BOI said.
China's Chery Automobile, which first rolled out a self-developed EV in 2009, is "very interested" to invest in Thailand and plans to enter the market early next year, according to the BOI.
Chongqing Changan, GAC and Chery did not respond to requests for comment on their plans for Thailand.
Chinese automaker Geely is also in the early stages of planning an entry into Thailand, Reuters reported in May, including weighing models for import and local manufacturing.
RISING POPULARITY
The influx of Chinese models appears to be helping to boost the popularity of EVs in Thailand, the second-largest car market in Southeast Asia.
In the first half of 2023, over 31,000 EVs were registered in Thailand, more than three times the number for all of 2022, the BOI said, citing industry data.
The price gap between EVs and combustion engine cars has also narrowed, in part because of government subsidies.
The cheapest variant of Great Wall's Ora Good Cat - Thailand's best-selling EV last year - currently costs around 828,500 baht, while Hozon's NETA V is priced at 549,000 baht, according to company websites.
On Toyota's Thailand website, the Corolla Altis is priced at 894,000 baht and the Yaris Ativ at 549,000 baht.
