Wednesday, 2024 February 28

Are Chinese Car Manufacturers Gaining on Japanese Brands in Thailand?

Chinese electric vehicles are finding opportunities for growth in Thailand as the nation moves to incentivize the purchase of such vehicles, allowing Chinese car manufacturers to see gains in the Thai market.

In February, Thailand unveiled a list of registered EVs that showcased the dominance of Chinese EV manufacturers. The list of the top three brands revealed that the Tesla Model Y stood alone as the sole non-Chinese brand. Leading the pack was BYD with its Atto 3, claiming the first spot with an impressive 2,068 registrations. Following closely behind was Hozon’s Neta V, securing second place with 1,254 registered models in February. These figures significantly surpassed Model Y’s 534 registrations.

BYD and Neta Motors both made announcements on March 10, 2023 regarding their respective production projects in Thailand. Such announcements indicate a general trend of increased interest in Thailand and Southeast Asia among Chinese car manufacturers.

Previously, Chinese automobile companies like SAIC, Great Wall, BYD, and NIO primarily directed their vehicle exports toward Europe. However, a shift in this trend has occurred due to the growing demand from consumers in Thailand and the implementation of government policies that support EVs.

Gaining ground in Thailand

One of the earliest domestic Chinese car manufacturers to succeed in the Thai market was the SAIC Group. In 2012, it established a joint venture with the well-known CP Group in Thailand, and its MG brand officially entered Thailand’s market in 2014. Data from that time showed that 31,005 MG models were sold in Thailand, placing it among the top ten car brands available in Thailand.

Several years later, Great Wall Motor entered the Thai market in 2021. Its ORA models have been so popular that many Bangkok dealers have struggled to keep up with demand. From January to September 2022, Great Wall Motor sold more than 8,000 EVs in Thailand, earning it the distinction of being the new energy vehicle brand with the highest sales volume in the country.

Great Wall Motor has introduced several models in the Thai market, including the Haval H6 HEV, JOLION HEV, and ORA.

Previously, Chinese car manufacturers expanded globally through acquisitions in overseas markets. Now these car manufacturers are leveraging opportunities to explore the automotive industry value chain through new approaches such as a focus on technology, services, and branding.

Chinese EV manufacturers find benefits in Thailand

EV100 PLUS, a China-based institution that specializes in EV research, concluded that Chinese car manufacturers most value Thailand’s large market, generous welfare, and favorable policies.

Thailand’s automobile market relies on brands from other countries, and most of the cars in the country are produced by foreign car manufacturers that have established local factories. As the largest automobile producer and second-largest automobile sales market among ASEAN member states, Thailand is the third-largest automobile exporter in Asia, second only to Japan and South Korea, with over half of automobiles produced in the country being exported.

According to statistics from the Federation of Thai Industries, 1.88 million models were produced in Thailand in 2022, of which 840,000 units were sold domestically and 1 million units were exported. The Vision Thai Research Center predicts that the overall market size for BEVs is likely to reach 50,000 models by 2023, a year-on-year increase of 270% compared to 13,454 models in 2022.

The layout and production capacity of automobile factories in Thailand reflect the country’s mature automobile supply chain. Manufacturers operating in Thailand can purchase most of the parts they require locally if they build a factory, which significantly reduces costs associated with logistics. By relying on Thailand’s own automotive manufacturing resources, car manufacturers are able to speed up production.

The Thai government’s policies targeting EVs provide ample incentives for Chinese car manufacturers as well. In an effort to become a manufacturing center and export base for EVs in Southeast Asia, Thailand has formulated what is referred to as the “30@30” policy. This initiative calls for the replacement rate of domestic EVs in Thailand to be above 30% and the production capacity of new energy vehicles to be above 30% by 2030.

In addition to this policy, the Thai government currently provides other forms of broad support for EVs. The Thai Board of Investment is providing corporate income tax exemptions for suppliers of various types of EVs for up to eight years. The National Electric Vehicle Policy Committee of Thailand has released a plan to transition to zero emissions in support of the plan. The Thai Ministry of Finance has invested THB 2.9 billion (USD 85.5 million) as part of its car purchase subsidy to encourage consumers to purchase and drive EVs. In terms of the battery industry chain, there are currently 18 projects underway in Thailand that involve battery production, module production, and module assembly.

Transitions and challenges for China’s EV manufacturers

Deloitte stated in a report titled The Leap from Going Overseas to Globalization: The 2nd Growth Curve for Chinese OEMs that Chinese car manufacturers have made a transition over the past decade from an approach focused on “product export” to “value chain globalization.” It is in this context that Chinese car manufacturers are exploring overseas markets through full value chains, such as R&D, manufacturing, logistics and transportation, and automotive finance. In doing so, they are paving the way for the comprehensive export of Chinese automobile brands and products.

At the China EV 100 Forum held in early April, An Conghui, President of Geely Holding Group and CEO of ZEEKR Intelligent Technology, stated that China’s new energy vehicle industry has become internationally competitive due to the effort the Chinese government has invested in the industry for over a decade. He suggested that large-scale exploration of overseas markets could help further unlock innovation and growth.

Deng Chenghao, CEO of Deepal Motor, told EV100 PLUS that consumers in the Southeast Asian market have similar consumption habits to consumers in China, and the Southeast Asian market has great potential.

Prospects for exploring overseas markets are good, but new energy vehicle companies still have challenges ahead. Before Southeast Asia came into the spotlight, Europe was a major hot spot for EVs, which led many car manufacturers to compete for a share of that market. After a year of development, however, most car manufacturers had yet to find new avenues of growth there.

Exploring opportunities in Southeast Asian markets likewise has its challenges. For example, many countries in Southeast Asia use a right-hand drive system. That means OEMs in China must customize the chassis and other components, adjust production lines, and develop new molds, all of which will cost tens of millions of yuan.

As for the market in Thailand specifically, Japanese cars accounted for roughly 90% of that market when gasoline-powered vehicles fully dominated the market. As the earliest car companies in Thailand, Japanese car manufacturers also hold considerable sway over the automotive industry chain, dealer channels, upstream and downstream parts suppliers, and other production supply chains.

This raises the question: do Chinese new energy vehicle companies have the potential to gain a solid foothold in such a market?

Thailand’s transition to EVs has been sluggish to some extent due to the slow transition of Japanese car manufacturers. This offers Chinese manufacturers an opportunity to accelerate their production and overtake Japanese brands.

In order to achieve this, Chinese companies must offer competitive pricing to lure traditional fuel-vehicle drivers and challenge the dominant position of Japanese manufacturers in the market. Additionally, increased investment in R&D is essential for Chinese companies to enhance their products and technology.

In addition to core technologies, localized solutions should be tailored to meet local requirements, and different product strategies should be developed and adjusted to fit different markets according to the specific models. Finally, Chinese manufacturers need to accelerate construction for improved charging infrastructure. Until this bottleneck is addressed, the ROI for EVs will be extremely low.

Chinese EV manufacturers are making inroads in Thailand, where their brands are seeing a surge in popularity. Thailand’s broad market, mature automobile supply chain, and supportive policies for EVs have all contributed to the growth of Chinese car manufacturers in the country. As they continue to explore overseas markets through a comprehensive approach to globalization, Chinese manufacturers are poised to make further inroads in Thailand and other Southeast Asian countries. The success of the pivot away from Europe to Southeast Asian markets will depend on Chinese car manufacturers’ ability to meet the needs of local consumers and maintain a lead on Japanese EV manufacturers.

This article was adapted based on a feature originally written by Zhou Shuangjiang and published on Chebai Think Tank (WeChat ID: EV100_Plus). 36Kr Global is authorized to translate, adapt, and publish its contents.

KrASIA Connection
KrASIA Connection
KrASIA Connection features translated and adapted high-quality insights published on 36Kr.com, the largest and most influential technology portal in Chinese language with over 150 million readers across the globe.
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