Thailand is quickly emerging as a popular destination for China's electric vehicle (EV) industry.
On one hand, Chinese brands have rapidly seized significant market share in the nascent Thai EV market. On the other, Chinese EV manufacturers and battery producers are riding a new wave of investments and establishing factories on Thai soil.
So, the question arises: Why Thailand?
01 Chinese New Energy Companies Eyeing the Thai Market
China's EV Focus Shifts to Thailand The current Thai EV market is still in its pioneering phase, but its potential for growth is tremendous.
Stirrings in the Thai Automobile Landscape The rapid ascent of EVs over the past two years has introduced a new dynamic to the Thai automotive market. Data from the Thailand Automotive Institute indicates that in 2022, car sales in Thailand reached 840,000 units, a 12% increase from 2021. Before the pandemic, annual car sales in Thailand surpassed one million units in both 2018 and 2019. With the pandemic waning, Thai car sales are projected to hit 950,000 units in 2023.
In terms of vehicle type popularity, Thailand's market is dominated by two segments: pickups, which are the preferred choice for Thai workers, farmers, small traders, and SMEs; and compact A0-category cars, aligning with Thai households' preference for each member to own a vehicle.
Within this broader context, while EVs still occupy a relatively small market share, they have shown explosive growth in recent years. According to the Thai Automobile Association, EV sales in Thailand were just under 2,000 units in 2021. By 2022, this number surged to 13,454 units, a staggering 588.5% year-over-year increase. Furthermore, projections from the Thailand Development Research Institute suggest that EV sales will break the 50,000 unit threshold in 2023 - a potential 271.6% growth.
Despite the still modest penetration of EVs in Thailand, it's evident that the market is on the cusp of a significant boom.
Much of this growth trend is attributed to policy drives by the Thai government. In February 2022, Thai authorities introduced stimulus policies for automobile consumption. Under these policies, import tariffs on EVs were reduced for 2022-2023, decreasing market prices for electric cars. Moreover, from 2022 to 2025, the government slashed the consumption tax rate from 8% to 2%. Additionally, EVs priced under 2 million Thai baht received subsidies up to 150,000 Thai baht (approximately $9,000).
Given these incentives, Thai consumers have shown heightened interest in EVs, leading to a mini-boom in the market.
Why Chinese EV Manufacturers?
Of note is the fact that Chinese brands are dominating the Thai EV scene. Based on 2023 sales figures from January to June, provided by Thai magazine Autolife, two models, the BYD Atto 3 and the NIO V, combined for a market share exceeding 50%. Moreover, out of the top ten EVs sold in Thailand, aside from Tesla's Model Y and Model 3 (which are imported from China), all other models are from Chinese brands, collectively occupying around 80% of the market.
Interestingly, estimates from the Thailand Development Research Institute suggest that Chinese brands accounted for 78% of the Thai EV market in 2022, a figure that could rise to 85% in 2023.
So, what's behind Chinese brands' impressive market capture?
One key reason is their timely introduction of models suited for the Thai market, aligning with policy incentives. For instance, SAIC Motor introduced its MG ZS EV in Thailand as early as 2019, achieving localized production and sales. Great Wall Motors launched its Ora brand, while BYD and NIO entered through import channels but still enjoyed the benefits of Thai tariff reductions and subsidies. Companies like SAIC, Great Wall, BYD, and NIO were among those eligible for local EV incentives.
Additionally, their market share can be credited to Chinese automakers' keen insight into local demands. Given income limitations (average monthly earnings in Thailand are around $81), entry-level, cost-effective compact cars are favored in Thailand. Addressing this, companies like SAIC and NIO introduced entry-level SUVs in Thailand, while Great Wall and BYD adjusted their pricing or launched more affordable versions to enhance appeal.
Furthermore, Chinese automakers have embraced local market customization. For example, SAIC introduced Thai-language voice recognition and control features, BYD offered colors popular with local consumers, and NIO expanded its authorized dealership network covering Bangkok and other major Thai cities.
It's worth mentioning that traditionally, Japanese automakers held sway in Thailand's passenger car market. However, their slow transition to the EV era made them miss out on the policy-driven boom. In contrast, Chinese brands, having extensively invested in the EV segment, are beginning to make inroads into the Thai market.
According to Hajime Yamamoto, head of the Thai consulting department at Nomura Securities, Chinese brands are poised to wrestle away at least 15% of the Thai market share from Japanese hands over the next decade.
Thai EV Charging Infrastructure Developments
As the Thai government promotes EV adoption, it's concurrently ramping up investments in charging infrastructure. As of 2021, Thailand's National Next-Generation Vehicle Committee approved incentives to promote the establishment of EV charging and battery-swapping stations. The target is to have a minimum of 12,000 charging stations and 1,450 battery-swapping stations by 2030.
As of the end of 2022, Thailand had 3,739 public charging stations. However, roughly half of these stations are slow chargers, which could hinder charging efficiency. The country's EV charging infrastructure currently supports two standards: Japan's DC CHAdeMO and Europe's DC CCS2.
While the existing charging infrastructure may suffice for current EV growth, it could prove insufficient for the burgeoning demand. As of now, the ratio of vehicles to charging stations in Thailand is roughly 20:1. This is in stark contrast to China, where the ratio is a more favorable 2.5:1, reflecting the latter's robust charging infrastructure developments.
A potential hurdle in the Thai EV landscape is the inconsistency in charging standards, potentially hampering the seamless integration of EVs into the Thai transport network. To address this, local authorities might need to adopt a more unified charging standard or ensure the compatibility of multiple standards.
In conclusion, with strategic policy measures and an influx of Chinese EV brands, Thailand is positioning itself as a prominent player in the ASEAN EV landscape. However, consistent investments in infrastructure and careful planning will be essential to sustain this momentum and ensure a smooth transition to a more sustainable transport future.
02 Why is China's New Energy Vehicle Industry Landing in Thailand?
As Chinese car companies rapidly seize the Thai pure electric vehicle market, the Chinese new energy vehicle industry has also ignited a wave of layout in Thailand. Not only car companies, but also core supply chains such as power batteries are involved.
Chinese Car Companies are Investing in Thailand One After Another
Currently, Chinese new energy vehicle companies have ignited a wave of construction of complete vehicle factories in Thailand.
SAIC Group and Great Wall Motors were among the first to make their moves in Thailand. In fact, SAIC had laid out plans in Thailand a decade ago, assembling MG cars in Thai factories and selling them to other markets. By 2019, with the transformation of SAIC Group towards new energy, MG launched its first electric model MG ZS EV in Thailand, followed by the release of MG EP and MG 4 Electric. Notably, at the end of April 2023, SAIC Group announced the construction of the SAIC Zhengda New Energy Industrial Park in Thailand. This park, covering an area of 120,000 square meters, will be completed and put into use in October this year.
Let's also look at Great Wall Motors. As one of the earliest electric car manufacturers to enter the Thai market, Great Wall Motors acquired the Rayong factory of General Motors in the US in 2020 and invested 22.6 billion Thai baht (approximately 4.72 billion RMB) for renovation. By June 2021, the factory started production. This new factory can produce a mix of hybrid, plug-in hybrid, pure electric vehicles, and traditional fuel vehicles, with an annual capacity of 80,000 units.
From 2022 onwards, a wave of Chinese car companies, which had not previously set up factories in Thailand, began to flock to Thailand for construction. For instance, in September 2022, just one month after entering the Thai market, BYD announced an agreement with Thailand's WHA Industrial Park. This factory was officially founded in March this year and is expected to start production in 2024.
This makes BYD the third Chinese-funded car brand to invest in a factory in Thailand.
In addition to BYD, many other Chinese car companies have publicly announced plans to set up factories in Thailand in 2023.
Accumulation of Industry and Policy Support
So why are Chinese car companies choosing to concentrate on new energy layouts in Thailand?
On the one hand, it is closely related to Thailand's local automotive industry environment.
For a long time, Thailand has been known as the "Detroit of Asia". From the 1960s to the beginning of the 21st century, the Thai government attracted many multinational car companies to set up production lines through a series of industrial policy adjustments. This made Thailand one of the automotive manufacturing centers in Southeast Asia.
Moreover, as the largest car manufacturing country in Southeast Asia, Thailand has an assembly and manufacturing capability of over 60 years, with an average annual production capacity of nearly 2 million vehicles, accounting for about half of the entire Southeast Asian car market.
It's worth noting that out of all the production, local sales in Thailand reached 849,000 units, but it's still dominated by traditional fuel vehicles. Therefore, whether it's production or sales, for the new energy car companies that are booming in China, Thailand is undoubtedly a "blue ocean".
On the other hand, the Thai automotive industry has a very strong export effect.
In fact, Thailand is not only a producer and consumer of cars but is also the largest car exporter in ASEAN. The export volume accounts for more than 50% of the total car production in the country, which can radiate to the entire Southeast Asia and even broader markets. Besides the Thai market, among the ten ASEAN countries, Singapore, Malaysia, Indonesia, and Brunei are right-hand drive markets. Additionally, there are market spaces in Europe, America, and Australia.
One could say that when Chinese automakers choose Thailand, they often see it as a key pivot for entering Southeast Asia and other overseas markets.
Of course, against this industrial background and market environment, the support of the Thai government in new energy vehicle policies is undoubtedly one of the key factors attracting Chinese automakers.
Specifically, the Thai government aims to make Thailand the largest electric vehicle manufacturing base in ASEAN, launching the "30@30" policy, aiming to achieve a target of electric vehicles accounting for 30% of the total national car production by 2030. Under this target, the Thai government has introduced a series of related preferential policies. For instance:
Starting in September 2022, to promote the popularization of electric vehicles, the Thai government implemented an electric vehicle subsidy plan. Firstly, eligible electric vehicles can enjoy a subsidy of 70,000 to 150,000 Thai Baht per car, which is about 14,000 to 30,000 RMB.
The second is tax incentives, including reductions in consumption tax, road tax, and import tariffs. For instance, new energy vehicles can enjoy a preferential tax rate of 2%, while the consumption tax rate for traditional cars is 8%; from 2022 to 2023, imported new energy vehicles to Thailand can enjoy up to a 40% discount on import tariffs.
Furthermore, companies that invest at least 5 billion Thai Baht (about 1.04 billion RMB) in electric vehicle production can be exempted from 20% corporate tax for 3 to 8 years. Pure electric vehicle manufacturers are exempt from corporate income tax for up to eight years, while plug-in hybrid projects can enjoy a three-year corporate income tax exemption. Before the end of 2025, they will exempt import duties on key components such as batteries and motors and promise to subsidize the electricity costs of car manufacturers.
Of course, these preferential policies are not unconditional. Car manufacturers must establish pure electric factories in Thailand to enjoy these benefits, and by the end of 2025, they must also produce an equal number of pure electric vehicles in Thailand to their import quantity.
Therefore, Chinese new energy automakers entering Thailand is indeed a result of mutual needs.
Not only vehicle manufacturers but also the layout of power batteries
Of course, in addition to vehicle manufacturers, the Thai government is also promoting the upstream industrial chain layout of new energy vehicles, especially the power battery industry, which is the core component of electric vehicles. This means opportunities for Chinese power battery manufacturers.
Previously, Duangjai Asawachintachit, the former Secretary-General of the Thailand Investment Committee, once stated:
In the past three years, measures to promote electric vehicle investment in Thailand have achieved obvious effects. By improving incentives for battery production, we hope to further strengthen the supply chain, which is an important factor in industry transformation.
According to the Thai government's latest revised preferential policies, those who use advanced technology to produce electric vehicle batteries (from battery cores to battery modules) and high-energy-density batteries for existing and new projects, if the products are sold domestically, will enjoy a 5-year, 90% exemption on import duties on raw materials and basic materials.
Under the guidance of Thai policy, Chinese companies have also begun to layout the Thai new energy vehicle industry chain, especially in the battery sector. In fact, companies like CATL, BYD, Guoxuan High-Tech, and Hive Energy have related investments and collaborations in Thailand.
Specifically:
In December 2022, Guoxuan High-Tech signed a cooperation agreement with Nuovo Plus, an energy solution company under the Thai PTT Group, to jointly establish Thai Xinguoxuan Co., Ltd. The aim is to achieve battery localization production and market development in Thailand and actively explore the ASEAN new energy market, striving to build a battery export base for ASEAN.
In January 2023, BYD's power battery factory project in Thailand was approved by the Thai Investment Committee. The company plans to invest 3.89 billion Thai Baht (about 810 million RMB) to supply batteries to its electric vehicle factory.
Hive Energy's factory in Thailand started construction in July and covers an area of 18,000 square meters. It is expected to be completed and put into production in early 2024, with an annual production capacity of about 60,000 battery pack modules, with an annual output value of about 140 million US dollars.
EVE Energy recently released an announcement, announcing that it will jointly establish a joint venture company with Thailand's EA Group to build a battery production base with at least 6 GWh/year capacity.
Worth mentioning, not long ago, the world's largest power battery manufacturer, CATL, also announced a CTP (high-efficiency grouping technology) cooperation agreement with Thailand's Arun Plus Co., Ltd. The two parties will strive to meet the local electric vehicle production demand and help Thailand become the battery production center of Southeast Asia. According to the agreement, CATL will provide Arun Plus with a CTP battery pack production line and share CTP battery pack production technology, etc.
CATL's move in Thailand, in addition to serving the local market's needs, also hopes to use Thailand as a pivot to cover its battery technology and products in a broader Southeast Asian market.
It's worth noting that Narit Therdsteerasukdi, Secretary-General of the Thailand Investment Committee, also stated:
We are in talks with many companies, not only CATL but also many companies in the battery industry. This is one of our goals. We hope to attract battery manufacturers to set up factories in Thailand.
03 Written at the end
Today, in the context of extreme involution and overcapacity in China's new energy automotive industry, going overseas has become an important way for the entire industry to seek larger market space and opportunities to land. Southeast Asia, with its population of over 700 million, is one of the key directions for expansion.
In this context, Thailand is indeed a good choice.
After all, as the major automotive manufacturing center in Southeast Asia, Thailand can be said to be the most proactive country in the entire region in terms of electrification transformation. It not only embraces new energy represented by pure electric at the domestic market level but also elevates the electrification transformation to a strategic level in the upstream and downstream industrial chain and drives this transformation through policies.
At the same time, another premise is that with the promotion of the "Belt and Road" initiative and the "China-ASEAN" comprehensive strategic partnership, economic and trade relations and cooperation between China and Southeast Asia are further deepening, and there are also good economic and cultural interactions between China and Thailand.
Therefore, in a relatively controllable geopolitical risk environment and with relatively favorable investment incentive policies, on the one hand, Thailand has not yet developed strong domestic new energy vehicles and related industrial enterprises and brands. On the other hand, Chinese new energy companies have obvious competitive advantages in terms of product strength, manufacturing technology, and industrial chain. Considering these factors, it is indeed easy for both sides to form a mutual need and attractive fit.
Currently, Thailand has set a goal to achieve 30% of its automotive production as zero-emission vehicles (mainly pure electric vehicles on the ground) by 2030, a strategy known as "30@30." This means that by then, Thailand will produce 40 GWh of batteries annually to power 725,000 pure electric vehicles.
This goal is still distant, but what can be confirmed is that in the process of achieving this goal, the Thai new energy automotive industry will be filled with busy figures from Chinese companies everywhere.
