China-led EV boom in Thailand threatens Japan’s grip on key market

Cooperation with Thailand Siam Motors Nissan In 1962, a factory producing four cars a day forged a decades-long profitable relationship with the Japanese company, transforming it from car dealership to automotive pioneer.

But the Thai family-owned business has grown to $7 billion in annual revenue on the back of that success and is now looking for opportunities elsewhere.

Sebastien Dupuy, vice president of Siam Motors, said in an interview that the company is in talks with several Chinese automakers about potential partnerships, especially in high-end electric vehicles .

“Electric vehicles will be a good growth driver,” he said. “This market is growing and we want to capture this growth opportunity.”

Siam’s stance reflects the rapid shift taking place in Thailand, where Chinese investments worth $1.44 billion have been made since 2020, including BYD and Great Wall Motoropening a new front in a market historically dominated by Japanese automakers.

Japanese automakers now face a scramble for another key Asian market as Japanese automakers are slow to make progress in electric vehicles following a sales crisis in China, according to registration data, industry officials and analysts.

The Chinese wave has begun to reshape Thailand’s auto industry, with Chinese electric carmakers bringing in suppliers, while local Thai players, including Siam Motors, which has longstanding ties to Japanese firms, are seeking new partnerships.

Thailand is the largest automobile producer and exporter in Southeast Asia and the second largest automobile sales market after Indonesia. Japanese automakers are so dominant that for decades they viewed it almost as an extension of their home market.

But last year, China overtook Japan to become Thailand’s biggest foreign investor, fueled by BYD’s investment in a new factory due to open in 2024, amid a concerted effort by Thai officials to woo Chinese electric car makers.

Thailand’s transformation offers a test for other economies as Chinese automakers ramp up exports and establish overseas production centers, partly to grapple with a fiercely competitive domestic electric vehicle market.

In Europe, for example, policies to support local EV production are still taking shape, and Chinese automakers are also pushing hard in a market where EVs now account for nearly a fifth of total sales.

Bangkok resident Pasit Chantarojwong has been driving a Toyota Corolla for 15 years, and only this year switched to a Great Wall Motors Ola Cat.

“I will never drive an internal 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 about 1% were electric, according to government data. But between January and April this year, that rose to more than 6 percent.

BYD is currently the market leader, followed by Chinese auto SAIC as well as Hozon and the American automaker teslaRegistration data showed 18,481 electric vehicles were sold between January and April.

More than 7,300 of them were BYD vehicles.Only 11 new EV registrations this year came from toyotathe leading brand in Thailand, together with its partners Isuzu and Honda It accounted for nearly 70 percent of total car and truck sales in Thailand last year.

Hajime Yamamoto, head of the Thailand consultancy at Nomura Research Institute, said Chinese brands could capture at least 15 percentage points of market share from Japan in the next decade by offering affordable electric vehicles.

“The Japanese can only target some high-end markets,” Yamamoto said.

Toyota and its group of companies, which has invested nearly $7 billion in Thailand over the past decade and employs about 275,000 people, told Reuters in a statement that it was considering making electric vehicles in the country, which is a key factor for the country. The company was officially confirmed for the first time.

Sales of the electric bZ4X began in Thailand last year and it has received 3,356 reservations, Toyota said.

It also hinted at the imminent launch of electric pickup trucks, but Goldman Sachs said in a note last month that “they increasingly need to consider expansion in other product areas.”

By 2030, Thailand Aim to convert around 30% of annual production Ambitious to convert 2.5 million vehicles to electric vehicles, become a major regional production center and actively seek investment for this purpose.

What Thailand is pitching to Chinese EV makers is its existing supply base (mainly built for Japanese automakers) and is prepared to offer incentives.

These include reduced import duties on the condition of subsequent local assembly, as well as some tax breaks for the manufacture of electric vehicles.

“We realized that if we wanted to become an electric vehicle hub in the region, we couldn’t just build the car assembly industry,” said Narit Sadestila, secretary-general of the Thailand Board of Investment, who has visited China several times in recent months. Su Kedi (Narit Therdsteerasukdi) said.

“We need to strengthen the entire ecosystem of electric vehicles.”

As of May 31, the BOI had approved 14 projects from 13 companies with an annual production capacity of 276,640 electric vehicles.

Narong Sritalayon, managing director of Great Wall Motor Thailand Branch, said Great Wall Motor chose Thailand as the regional center for electric vehicles because of the country’s strong infrastructure, supplier and talent base, and growth potential.

“You want to be in a market that has purchasing power and can support your future growth plans, especially in new business areas like electric vehicles,” he said.