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 buying electric vehicles sold by Chinese car companies but made in Thailand, in a nation that has become one of the front lines in the battle for car market supremacy.
In the past two years, Chinese automakers including BYD, GAC Aion and Chery have announced plans to build manufacturing facilities in Thailand. BYD and GAC Aion factories began operations in July, and so far Chinese investments in Thai car factories total at least 1.4 billion dollars.
Narong’s EV is one of 80,000 battery electric vehicles expected to be registered this year by the Electric Vehicle Association of Thailand. Last year, Thailand registered 76,739 BEVs, according to government data, 6.5 times more than in 2022.
Although the pace of electric vehicle adoption in Thailand has slowed this year, like many other parts of the world, it is part of a growing trend. Chinese car companies, led by BYD, are entering markets long dominated by Japanese, US and German automakers. As of 2020, Chinese auto brands, especially EV makers, are expanding internationally in search of more revenue as fierce competition and domestic oversupply eat away at market share.
But with geopolitical obstacles preventing them from pursuing car buyers in Europe and North America, these Chinese automakers are aggressively entering middle-income markets such as Thailand, Indonesia, Brazil, Malaysia and Argentina, where there is often no champion car brand to protect. governments have at least a somewhat cordial relationship with Beijing.
In Thailand, Chinese electric vehicle manufacturers are beginning to challenge the Japanese brands that have long dominated the Thai car market. Chinese brands have bought huge billboards on the highways between Suvarnabhumi Airport and Bangkok. In the city, more showrooms have vehicles from China, and China’s electric vehicle production facilities are less than two hours from Bangkok. When fully operational, these EV facilities in China could together increase production to build at least 320,000 vehicles per year.
“There are a couple of things that make Thailand attractive,” says Eugene Hsiao, Hong Kong-based head of China equity strategy and China autos at Macquarie. “The first and most obvious thing is that Thailand as a country is quite respectful of China. I think that is very important. The second is that the auto supply chain is already quite developed. The Japanese did quite a bit of that historically.”
Thailand’s central location in the region makes the country a gateway to the wider Southeast Asian market, and Thailand itself has a large automotive market compared to other countries in the region, said GAC Aion Thailand spokesperson.
As they have done in Thailand, Chinese car manufacturers are making investments around the world. Led by established brands like BYD, SAIC and Chery, they are assembling cars in the country to get incentives or avoid tariffs.
“Affordability is a universal value proposition.”
Bill Russo, Founder and CEO of Automotive
While Brazil has reinstated import taxes on electric vehicles, regardless of origin, the government also has a program that encourages companies to decarbonize, and auto companies can receive tax breaks based on the energy efficiency of car models and the density of local production. Manufacturing in Hungary could allow Chinese electric vehicles to avoid EU tariffs, and in Malaysia, despite local car brands, the government offers tax exemptions for locally assembled electric vehicles.
There is a clear strategy behind the choice of countries where Chinese manufacturers have set up shop, says Hsiao. In this case, bigger doesn’t necessarily mean better.
“The best GDP per capita markets would be the large developed markets, ie the US, Europe and Japan. Those markets are the most closed, you might say,” he says, but there are “other smaller but significant markets” for Chinese car brands.
Beijing identified the EV sector as a strategic industry worthy of state support more than a decade ago, providing subsidies to both manufacturers and consumers. There were once 500 electric vehicle companies in China, but competition and the phasing out of subsidies have encouraged consolidation.
Traditional European and US automakers are struggling to compete or match China’s EV offerings at lower prices. This has plunged it into rock bottom, with Volkswagen announcing plans to cut wages and close factories at the end of October. Japanese automakers have also been slower to transition to electric vehicles, and Japan’s largest automaker, Toyota, believes the EV transition won’t happen as quickly as expected, opting instead for hybrids. That strategy seems to be working for Toyota so far, as it retained its title as the world’s largest automaker last year. Toyota’s figures for the first nine months of this year showed Toyota sold nearly 3 million hybrid vehicles, a year-on-year increase of 19.8%.
Car manufacturing accounts for 10% of Thailand’s GDP and creates about 850,000 jobs, according to the International Labor Organization. Its history with the automotive industry dates back to the 1960s, when Japanese manufacturers such as Toyota, Nissan and Mitsubishi opened production facilities in the country. Soon after, American and European brands followed.
From the beginning, Thailand relied on incentives and tariffs to become the region’s auto manufacturing hub. He initiated an import substitution policy—replacing foreign imports with domestic production—for the automobile 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 automakers enjoy lower export taxes when selling in the region. The Thai government’s high import duties of up to 80% for passenger vehicles and 30% for pickups further encourage automakers to continue manufacturing in Thailand.
Now the Thai government is betting that EVs will allow it to maintain its position as the “Detroit of Southeast Asia.”
Bangkok has a “30@30” plan, which aims to have 30% of cars produced be electric vehicles by 2030. In early 2022, Thailand approved a series of incentives to encourage the adoption of electric vehicles in the country, with the goal of eventually becoming Thailand. a regional electric vehicle manufacturing site.
Material investments in manufacturing by Chinese companies can influence the decision-making of buyers like Narong, a retired civil servant. As these companies have set up assembly plants in Thailand, parts are more readily available and maintenance should be easier, helping to ensure the reliability of Chinese cars. A less fractious geopolitical relationship could also make buyers like him more open to giving Chinese cars a chance.
“They also produce a lot of electric vehicles to serve their own market, and the government provides full support, and I think these lead to good experiences and reliability,” says Narong.
But even though these Chinese electric vehicles are starting to make inroads in Thailand, they are still challenging and have yet to overtake the automakers. Charging anxiety remains an issue that needs to be addressed, and for the most part, EV adoption is happening faster in Bangkok. In mountainous regions like Chiang Mai, a Toyota pickup can remain a favorite choice.
Toyota was still Thailand’s No. 1 car company last year, selling 265,949 vehicles, according to data from its Thai subsidiary, followed by Isuzu, Honda and Ford. BYD was sixth with 30,432 cars sold, just 2,000 vehicles behind fifth-placed Mitsubishi. Collectively, Chinese brands, led by BYD, accounted for 11% of the new car market share, more than double the previous year, while Japanese vehicle sales fell. Chinese brands accounted for about 80% of Thailand’s electric vehicle sales last year.
Thailand’s tax breaks for electric vehicles make the country an attractive market, says GAC Aion Thailand spokesperson. Other nations are also offering tax breaks for electric vehicles, which should spur further demand.
“Affordability is a universal value proposition,” says Bill Russo, founder and CEO of Automobility, a Shanghai-based strategy and investment advisory firm for the automotive industry.
However, according to Russo, the threat posed by Chinese automakers to established automakers is more than electric vehicles.
Despite talk of Chinese electric vehicles entering foreign markets, China is also said to be exporting a large number of conventional internal combustion engine (ICE) vehicles. As consumers in China, the world’s largest auto market, are rapidly choosing electric vehicles over ICEs, the country’s automakers are left with more ICE vehicles than the market can absorb, Russo explained. This means they want to offload millions of cars elsewhere. While China has not had much success selling gasoline-powered cars in Thailand, other markets that are on the fence about electric vehicles are ripe.
“Sell to Russia, sell to Mexico, sell to Brazil. Sell them to places where consumers don’t trust EVs yet,” says Russo.
China exported 4.91 million vehicles last year, overtaking Japan as the world’s largest car exporter. Plug-in hybrids and battery-electric vehicles accounted for about 25% of exports, meaning Chinese brands are selling plenty of gasoline-powered vehicles.
Exports to Russia still dominate, but Chinese automakers have greatly expanded their market share in Mexico, Brazil, Turkey and the UAE, according to data compiled by Automobility.
Governments view Chinese automakers only through an EV lens, so ICE vehicles are still being exported unhindered, Russo said. This gives Chinese automakers an opening.
“You set up your dealer networks, you establish your brand, you’ve got that beachhead,” Russo says. After establishing themselves as a trusted brand, automakers can start introducing electric vehicles.
Automakers used the same strategy in China, says Russo: “That’s what they’re going to do internationally; they will go to all the countries they can and then they will move to EVs”.
This article appears in the December 2024/January 2025 issue of Fortune magazine under the headline “Changing Lanes.”
