"If you ask me about Chinese electric vehicles, my answer is to buy another one."

Written by | Huashang Taolue, Dongmu Chu

On December 13, 2023, Thai Prime Minister Prayut Chan-o-cha, who was visiting Japan, specifically met with local automakers' CEOs. He urged the executives of Japanese automakers, "If you don't start making electric cars, you'll be left behind."

The automotive industry is one of Thailand's most important economic pillars, and this pillar has been supported by Japanese automakers. Facing the rise of new energy vehicles, Japanese automakers' sluggishness in this area makes Prayut's concerns justified.

But now, he probably doesn't have to worry about it anymore: If Japanese automakers don't make an effort, Chinese automakers will do it for them. On July 4, BYD rolled off its 8 millionth new energy vehicle from its factory in Thailand.

【Racing Forward】

A Thai trade official said, "We have formulated new policies to promote the production and popularization of electric vehicles. Every enterprise has room to benefit from this policy, but Chinese companies have already taken the lead."

His words were somewhat intended for Japanese companies, but they are also true.

Currently, Thailand's new energy vehicle penetration rate has reached 12%. BYD, which officially entered this market in 2022, has become an absolute mainstay, accounting for up to 41% of Thailand's new energy vehicle market.

BYD Chairman Wang Chuanfu is obviously satisfied with this achievement. In his speech at the offline ceremony for the 8 millionth new energy vehicle, he predicted that Thailand has entered the golden age of new energy vehicle development and humbly acknowledged BYD's achievements:

"One out of every three cars sold is a BYD."

Pingpa Wichaikun, the Minister of Industry of Thailand, who came to congratulate, said, "Thank you very much to BYD for choosing Thailand as its first overseas base in Southeast Asia." She also didn't forget to advertise for herself:

"Thailand has a complete automotive industry system that can provide excellent conditions for BYD's Thai factory."

Sudirawa Teesathirawa, Secretary-General of the Board of Investment of Thailand, further stated that cash subsidies and tax exemptions for BYD in Thailand will continue. "We hope BYD will continue to invest!"

The words of Thai ministers and secretaries reveal the reasons why Chinese new energy vehicles are venturing into Thailand, but it doesn't stop there.

In January 2018, Thailand implemented zero tariffs on electric vehicles imported from China, marking the beginning of China's electric vehicle advance. Before BYD entered, several Chinese automakers had already set up camp in Thailand.

As early as 2013, SAIC Motor jointly established a joint venture with Thailand's Charoen Pokphand Group, initiating a car development strategy based in Thailand and facing ASEAN, competing with Japanese cars that dominated 90% of the Thai market at the time.

Today, SAIC MG has accumulated 180,000 car owners in the local area.

In Rayong, an important industrial base in eastern Thailand where BYD invested in building a factory, Great Wall Motors officially settled there in September 2020 by acquiring General Motors' factory.

The Rayong factory of General Motors was put into production in 2000, covering an area of 818,100 square meters with 1,500 employees, and had a maximum annual production capacity of 135,000 vehicles. It had produced nearly 1.4 million pickup trucks and SUVs, with products targeting both the domestic Thai market and export markets.

Behind General Motors' sale of its Thai factory is also a microcosm of China's competitiveness in the automotive industry with traditional automotive powers. Due to a decline in its global market share, leading to low factory utilization rates, General Motors had to stop production in Thailand, while Wei Jianjun, Chairman of Great Wall Motors, saw it as an opportunity to expand into overseas markets.

The Rayong factory in Thailand is Great Wall Motors' first overseas pure new energy vehicle manufacturing base. At the beginning of the acquisition, Thai employees were worried about layoffs and whether Great Wall, a "new brand," could gain a foothold in Thailand.

Ultimately, Great Wall Motors dispelled concerns with actions and performance: 100% of employees who wished to stay were retained, and 3,000 jobs were provided for related enterprises, with nearly 90% of them being local employees, and some were given opportunities to further their studies at the company's headquarters in China.

A Thai employee who participated in the training said that while working at Great Wall's Xushui vehicle production base in Hebei, he ate donkey meat sandwiches, "and saw many colleagues from all over the world, feeling the internationalization of Great Wall Motors."

Since its launch, the Haval H6 HEV produced by Great Wall Motors' Thai factory has consistently won the monthly sales championship in the C-segment SUV market in Thailand. In January of this year, Great Wall Motors also began producing pure electric vehicles at its Thai factory, with plans to produce 8,000 "ORA Good Cat" vehicles in the first year.

In the second year after Great Wall Motors settled in Thailand, the Thai government released its "Vision 2030," proposing that 30% of vehicles produced in Thailand by 2030 will be zero-emission electric vehicles, and supporting it with a car purchase subsidy system of up to 150,000 Thai baht.

The condition is that production must commence locally from 2024.

The starting gun for the new energy transition has sounded, prompting more Chinese automakers to accelerate their advance into the Thai market and invest in local factories.

In August 2022, BYD entered the Thai market with three models: BYD ATTO 3, BYD DOLPHIN, and BYD SEAL, and within half a year, it initiated the construction of a factory in Rayong.

In April 2023, SAIC, which entered the Thai market a decade ago, also started production in the Hemaraj Industrial Estate in Chonburi, Thailand, and rolled off its first locally produced pure electric vehicle in November of that year.

In April of this year, Sudirawa Teesathirawa, Secretary-General of the Board of Investment of Thailand, led a delegation to China for a roadshow and held talks with more than ten automotive and auto parts manufacturing enterprises, including Changan Automobile, Geely Automobile, JAC Motor, and Jiangling Motors, with the theme of attracting Chinese enterprises to invest in Thailand.

After the meeting, Secretary-General Sudirawa told the media that Chinese enterprises need to find a second production base outside of China to diversify risks and control costs, and Thailand should be one of the target countries.

To date, eight major Chinese automakers, including BYD, SAIC, Great Wall Motors, Changan Automobile, GAC Aion, Beiqi Foton, NIO, and Chery, have established factories in Thailand, collectively accounting for 80% of the Thai new energy vehicle market.

【Japanese Companies Respond】

Thailand's automotive market was established and dominated by Japanese automakers from the beginning.

In 1961, Thailand implemented its first "Five-Year Plan," deciding to introduce foreign technology to establish its own automotive industry. Coincidentally, Japanese companies were actively exploring overseas markets and implementing a Japanese version of the "Marshall Plan" in Southeast Asian countries, allowing Japanese automakers to land in Thailand and become its most important partners in the automotive industry.

When Thailand's first auto parts factory, Siam Motors, went into production, Nissan promptly entered, providing comprehensive support from funding to personnel training. By the 1980s, almost all of Thailand's dozen large auto parts factories were joint ventures with Japanese automakers such as Toyota, Honda, and Mitsubishi.

In the 1990s, Thailand entered a period of rapid development with an annual GDP growth rate of 7%, and the middle-income class grew rapidly, gradually becoming the largest automotive market in ASEAN and maintaining that status to this day.

By 2023, Thailand ranked first in ASEAN with 1.84 million vehicles produced, and Japanese automakers still held a dominant position. In 2023, the total sales of new vehicles in Thailand were 775,780 units, with the top five being Toyota, Isuzu, Honda, Ford, and Mitsubishi. Japanese cars' advantage in traditional fields remains unshaken.

On the streets of Bangkok, Japanese sedans are everywhere, and in rural areas, farmers drive Toyota pickup trucks. Thailand's automotive market regulations and standards, and even the standards for building 4S stores, are all copied from Japanese standards.

However, the entry of Chinese cars is rapidly changing the situation.

By 2023, China had three seats in the top 10 of Thailand's automotive market sales rankings, with BYD ranking sixth, SAIC MG and NIO ranking seventh and tenth, respectively. Together, Chinese automakers secured an 11% market share in Thailand, reducing the share of Japanese cars from 90% to 78%.

Such an aggressive offensive naturally triggered a counterattack from Japanese automakers, and a new race for dominance is underway. The focus of competition is naturally new energy vehicles, which are more encouraged by the Thai government.

Last December, Honda announced the start of EV passenger car production in Thailand, becoming the first Japanese company to produce passenger EVs in the country, with its SUV pure electric model "e:N1" rolling off the production line at its factory in Prachinburi, eastern Thailand.

In the same month, a Thai government spokesperson revealed that major Japanese automakers such as Toyota, Honda, Isuzu, and Mitsubishi had planned to invest 150 billion Thai baht (about $4.34 billion) in Thailand over the next five years to support Thailand's transition to electric vehicles.

According to Thai media reports, the specific investment plans of related automakers are that Toyota and Honda will each invest approximately 50 billion Thai baht, Isuzu will invest 30 billion Thai baht, and Mitsubishi will invest 20 billion Thai baht.

Toyota Motor President Akio Toyoda has even accelerated the electric vehicle plan while questioning the full electrification of automobiles to influence the Thai government's support for Chinese electric vehicles.

During a visit to Thailand, he told reporters, "Is it really okay to go all-in on electric vehicles? A multiple-energy development approach should be pursued, including hybrid electric vehicles, plug-in hybrid electric vehicles, fuel cell electric vehicles, and pure electric vehicles."

The Bangkok International Motor Show in March 2024 can be seen as a microcosm of the head-to-head competition between Chinese and Japanese automakers.

During the event, a total of 53,438 vehicles were ordered by consumers, with electric vehicles accounting for 32.8% of the total. Among the top ten orders, Chinese and Japanese brands each took half. Toyota ranked first with 8,540 orders, BYD ranked second with 5,345 orders, Honda ranked third with 4,607 orders, and SAIC MG, Changan Automobile, and GAC Aion ranked fourth, sixth, and seventh, respectively.

【Setting New Benchmarks】

In April 2024, the penetration rate of new energy vehicles in China's domestic automotive market exceeded 50% for the first time.

This speed greatly exceeded previous expectations.

In 2020, China set a target of achieving a new energy vehicle penetration rate exceeding 50% by 2035. That year, China's new energy vehicle market penetration rate was only 5.8%.

Achieving the planned target 11 years ahead of schedule, the speed of China's new energy vehicles has shocked the global automotive industry.

Beyond the shock, China has far surpassed the United States, Europe, and automotive industry giants such as Japan and South Korea, as well as the progress of these countries' governments, becoming a global leader in the new energy vehicle industry and awakening the counterattacks of giants and their governments.

The transition from gasoline vehicles to electric vehicles is not just an energy transition but also a strategic-level game of national interests.

Automotive giants represented by BMW, Mercedes-Benz, Audi, Toyota, and Hyundai will not easily give up decades of market accumulation. Even though new energy vehicles are the general trend, the difficulty for Chinese automakers going overseas is far greater than that in China.

In October 2023, the European Union launched a countervailing investigation into Chinese imports of pure electric vehicles and announced a few days ago that it would impose provisional tariffs on Chinese electric vehicles: In May 2024, the White House also announced new tariffs on $18 billion worth of Chinese imports, with tariffs on electric vehicles increasing from 25% to 100%.

Under such limitations, it is crucial to recreate a model of breakthroughs in new energy vehicle penetration outside the Chinese market. Thailand, which is already a manufacturing hub for automobiles in Southeast Asia, the eighth largest automobile exporter globally, and intensifying its development of new energy vehicles, is undoubtedly an excellent target market.

However, to win in this market, Chinese automakers, who have made a good start, need to make more efforts, including more artful development rhythms and competitive strategies.

From Thailand's perspective, a monopoly by one side is obviously inferior to competition among multiple parties. A mixed battle among Chinese, Japanese, European, and American automakers is the most conducive to market prosperity, which is both an opportunity for Chinese automakers to help them break free from their long-term dependence on Japanese automakers and a challenge not to be too aggressive, leading to concerns that they will dominate the market in the future.

The feelings of Japanese automakers, who are still the absolute mainstay, are also one of the key considerations for Thai industry policymakers. This can be seen from the move by a Thai government spokesperson to reveal joint investments by major Japanese automakers.

When Thai Prime Minister Prayut visited the United States and Japan, he invited local automakers, and he even told Japanese automaker executives, "If you don't start making electric cars, you'll be left behind," leading to the "investment" of 150 billion Thai baht from Japan's five major automakers.

Grasping the rhythm has thus become important for Chinese automakers.

Another crucial point is to carefully consider the potential negative impact that the increasingly fierce price war in China may have if it is transplanted to overseas markets, avoiding excessive competition that may win against competitors but lose oneself.

Currently, the price reductions of Chinese small pure electric sedans in the Thai market have already caused negative market reactions. From the perspective of the development of Chinese automakers themselves, aiming for the low-end market is not conducive to long-term interests. In other words, the going-out of Chinese new energy vehicles should not be about internal competition among Chinese automakers in new energy, but external competition against gasoline vehicles.

For example, in the Thai market, it is more appropriate to challenge the comfort zone of Japanese cars. In this regard, there is also a good start. For example, Great Wall Motors launched its hybrid pickup truck in May, targeting the HV track where Japanese cars have an advantage.

Narong, the head of Great Wall Motors in Thailand, said, "Price wars are not good for Chinese companies."

Based on their advantages in comfort and intelligence, Chinese new energy vehicles should also have the confidence to challenge higher market positions, allowing more mid-to-high-end consumers in Thailand to experience and enjoy the superior experience of Chinese electric vehicles.

Once this experience is more widely perceived, the mindset of gasoline vehicle consumers will gradually change. A Thai consumer who purchased a Chinese electric vehicle said:

"If you ask me about Chinese electric vehicles, my answer is to buy another one."

In 2021, the penetration rate of new energy vehicles in Thailand was less than 1%. By 2023, this figure had surged to 12%. Based on China's experience, when the penetration rate of new energy vehicles surpasses 10%, exponential growth is on the horizon.