[Thailand]How does the "Detroit of Southeast Asia" ride the new energy car circuit?
https://mp.weixin.qq.com/s/JykFOZPGN5RsSmW8bANpDA
Author: Tang Qi
While Detroit, the 'Motor City' of the United States, is known to be the home of many major automotive conglomerates, Thailand is also known as the 'Detroit of Southeast Asia'. Thailand has been one of the 'strongholds' of the automotive industry for decades, and according to the World Organisation for the Automobile (OICA), Thailand has been the world's 10th largest car producer and 18th largest car sales market in 2021.
However, with the world facing energy shortages, environmental pollution and epidemic, the traditional fuel car market is being hit and the trend towards electrification is becoming more pronounced. As the backbone of the ASEAN automotive industry, how can Thailand's automotive industry accelerate the industrial layout of new energy vehicles and gradually adapt to the development of the shift to new energy vehicles?
01 How big is the "pie" in Thailand?
The development of the automotive industry in Thailand began in the 1960s and has gradually taken off in the 21st century. Today, the automotive industry has become an important pillar of Thailand's economy, and Thailand is the largest producer and second largest market for cars in ASEAN countries, and the third largest exporter of cars in Asia after Japan and South Korea.
There are both historical and practical reasons behind Thailand's well-developed automotive industry. At the beginning of the Thai auto industry's efforts to attract foreign investment, Japanese car companies happened to be actively seeking overseas expansion as well, and were looking at Thailand's climate, transportation, taxation, labour costs and other advantages. Subsequently, Japanese automakers such as Honda, Toyota and Mitsubishi have seized the opportunity to build plants and invest in Thailand, seizing the opportunity in terms of industrial development and market layout.
After half a century of development, Japanese car companies have dominated every segment of the Thai passenger car market. German, French and American cars have all tried to crack the Southeast Asian market, but have mostly failed.
But does this mean that there is no chance of entering the Thai car market? Apparently not. While Japanese automakers are dominant in the traditional fuel car segment, the Thai market is still a hot spot for new energy vehicles. With the global trend towards electrification, the new energy vehicle industry is gaining momentum, and the Thai new energy vehicle market is still in a phase of rapid expansion, with plenty of room for investment.
In addition, the demand for new energy vehicles in Thailand is also growing, with less than 10,000 new energy vehicles in 2016, but more than 40,000 in 2021. While overall car sales in Thailand have declined due to the epidemic, with annual car sales in Thailand down 21.4% in 2020 compared to the previous year, sales of pure electric vehicles in Thailand exceed 2,000 units, an increase from 2019.
Thus, Thailand has the strength to support the development of the new energy vehicle industry and the ability to expand the new energy vehicle consumer market, both in terms of the country's traditional automotive industry base, market volume and consumption capacity. And based on Thailand's foreign exports, car companies are actually facing a larger "cake" of the entire ASEAN market.
02 How can the "Detroit of Southeast Asia" ride on a new track?
The Thai government's development of new energy vehicles has become a major trend, supported by the industry's advantages and the broad market prospects. According to the Thai government's target, the annual production of new energy vehicles in Thailand will reach 750,000 units by 2030, accounting for 30% of the country's total vehicle production. In addition, the Thai government plans to attract 400 billion baht (approximately RMB 75.3 billion) of investment over the next few years to achieve a production capacity of 1.2 million new energy vehicles by 2036.
However, the competitive landscape of Thailand's new energy vehicle market has now changed significantly, with the country set to accelerate support for the development of the pure electric vehicle market from 2022 to 2025. In April 2022, the Thai government introduced a package of incentives, including a significant reduction in import tariffs and excise duties on purely electric vehicles, on top of the existing subsidies.
In addition, Thailand will focus on three main areas: zero-emission vehicles, next-generation vehicle technology, and business model innovation, to create a complete pure electric vehicle industry chain. Around this goal, the Board of Investment of Thailand has introduced a series of incentives, including tax exemptions for car manufacturers producing more than one type of new energy vehicle components; reduced purchase taxes on new energy vehicles and subsidies for vehicle purchases; and the establishment of a US$2.7 billion project investment incentive fund.
Driven by a series of policies, Thailand's pure electric vehicle market has seen explosive growth. A report by the Thailand Automotive Research Institute shows that sales of pure electric vehicles in Thailand reached 5,781 units in 2021, an increase of 92.8% year-on-year. And Thailand's Kai Thai Research Centre expects sales of pure electric vehicles in Thailand to exceed 10,000 units in 2022. The government's implementation of a package of measures will bring opportunities for the industry to grow, and the Thai pure electric vehicle industry is seeing rapid growth.
03 How can Chinese new energy vehicle companies "break through" to the Thai market?
As Thailand's automotive industry gradually "changes lanes" towards new energy vehicles, new energy car companies from various countries are accelerating their deployment, and the one that is gaining momentum is the Chinese car companies. SAIC Motor entered the Thai market 10 years ago, and has been "taking one step at a time" for the past 10 years. From the first assembly plant in Thailand in 2013 to the more intelligent SAIC Motor's second plant in Chonburi in 2017, SAIC Motor has now taken over half of the pure electric vehicle market in Thailand. In 2019, SAIC Motor captured more than 90% of the pure electric vehicle market in Thailand with its first two pure electric vehicle models, the MG ZS EV and MG EP.
Also seizing the opportunity is Great Wall Motor. As GM exits the Thai market in 2020, Great Wall Motors has decisively acquired GM's car manufacturing plant and powertrain factory in Rayong Province, and has undertaken intelligent renovation and upgrading. At present, Haval H6 HEV, Haval JOLION HEV, Ola Goodcat and Ola Goodcat GT have officially landed in the Thai market, and with the arrival of Haval H6 PHEV, Great Wall Motor has built a new energy product matrix in Thailand covering various power forms of pure electric vehicles (EV), hybrid electric vehicles (HEV) and plug-in hybrid electric vehicles (PHEV).
In addition, in September 2022, Chinese new energy vehicle companies Nezha Motors and BYD also landed in Thailand to tap into the Thai market with pure electric vehicles. Although Chinese new energy companies have already made their mark in Thailand, they still have a lot of homework to do in order to "stand out" from the entrenched Japanese car market.
Obviously, Chinese car companies need to have a deep insight into the consumer needs of the Thai people, and for the mass consumer market, they will emphasise value for money in terms of vehicle price, durability and practicality. For example, SAIC's first pure electric vehicle in Thailand, the MG ZS EV, has been well received by the Thai market for its economy and practicality, as well as for its "PASSION SERVICE" service brand.
If local production in Thailand has given Chinese automakers a "ticket" to the Thai market, local R&D has given them the strength to challenge the Japanese brands. For example, Great Wall Motor has introduced advanced technology into its factories, collaborated with local component manufacturers to develop new products, shared professional knowledge of automotive production technology and accelerated local talent pools and training, giving Chinese automakers a stronger resistance to risk.
In addition, focusing on the growth performance of new energy vehicles in the Thai rental market and addressing issues such as resale rates and maintenance costs in the used vehicle market will also be beneficial for Chinese new energy vehicle companies to gain more market share in Thailand in the long run.
The new energy vehicle market presents both opportunities and challenges. In order to take the opportunity to "overtake" the market, Chinese automakers must not only take the crucial step of going abroad to Thailand, but also prepare for new markets in the future.