photo Source @ Visual China

wen | Whale Dimension, Author | Fanie

thailand is becoming the first choice for China's new energy vehicles to go to sea.

According to data from the China Automobile Association, China exported 3.111 million cars in 2022, up 54.4 percent year-on-year. Among them, 679,000 new energy vehicles were exported, an increase of 1.2 times over the same period last year, accounting for 21.83 percent of exports.

With the export boom, Thailand also let Chinese car companies focus. Great Wall Motor and SAIC are the pioneers in the layout of Thailand. The former will start production in Thailand in 2021, while the latter will invest in Thailand as early as 2013. At the same time last year, BYD official announced that it would build a factory in Thailand and put into production new energy vehicles.

What is the charm of Thailand, attracting domestic car companies to compete for layout?

01 city of automobile industry

behind the layout of car companies is Thailand's confidence as an "important town" of the international automobile industry.

Thailand is ASEAN's largest automobile producer and the second largest automobile sales market. It is Asia's third largest automobile exporter after Japan and South Korea. Every year, half of the automobile production is used for export. According to statistics from the Federation of Thai Industries, Thailand will produce 1.88 million cars in 2022, of which 840,000 will be sold domestically and 1 million will be exported.

Why can Thailand become the largest automobile producer in ASEAN? Thailand's automobile story starts in 1961. At that time, the Thai government promulgated the Industrial Investment Encouragement Law, which encouraged foreign-funded enterprises to invest in the automobile industry through tax incentives and investment subsidies, and replaced imported cars with domestically produced cars. After that, a series of policies were successively introduced to encourage the development of the local automobile industry. This period lasted until 1980, and the Thai automobile industry was still in the period of import substitution.

During this period, Thailand adopted the "triangle alliance" model, that is, led by state agencies, the introduction of multinational companies, and then these multinational companies and domestic capital cooperation, the formation of the three mutual cooperation model. However, for the sake of protecting domestic enterprises, TNCs could not hold more than 49 per cent of their shares in subsidiaries established in Thailand at that time.

At the same time, the Thai Investment Authority (BOI) has given foreign investors many preferential treatment, such as 50% reduction of CKD(Complete Knocked Down, import in bulk) import tariff for 5 years, reduction of business tax on joint ventures for 5 years, free remittance of foreign capital and free import and export of recent and technology.

These policies have worked very well. In just 10 years, 9 well-known multinational car companies have entered Thailand. Among them, Japanese investment and establishment of factories in Thailand are mainly in Bangkok and the nearby Beilan, and the effect of group living is gradually produced here.

facts have proved that Thailand's policy is right. The arrival of multinational enterprises not only brings money to Thailand, but also technology, equipment, management and a series of things. However, Thailand has gradually increased import tariff rates since 1970 and implemented restrictions on vehicle models and engine size. Multinational companies such as Europe and the United States are dissatisfied with these policies and gradually withdraw from the Thai market because of the loss of policy advantages.

However, Japanese capital precisely supports these restrictive policies and conforms to the policies to improve the models and engine sizes, which gradually dominates the Thai automobile industry and establishes its influence on the Thai automobile industry for decades to come. However, at this stage, the protection measures implemented by the Thai government did not allow domestic manufacturers to develop rapidly. At the same time, high car prices restricted the growth of car demand.

Since 1980, Thailand has gradually shifted to a liberalized industrial policy and established an export-oriented automobile industry development model. ASEAN also implemented the "ASEAN Industrial Parts Circulation Preferential Measures (AIJVS)" in 1983 ".

In 1985, Japan, faced with the problem of relocation of manufacturing plants, chose Thailand as a springboard to enter ASEAN intra-regional trade, positioning Thailand as an automobile production hub in the ASEAN region. South Korean car companies and Ford and GM of the United States have also increased their investment in new factories in Thailand. The technical level of automobile production in Thailand has been comprehensively upgraded, and more enterprises have set up assembly plants and component production plants for specific models in Thailand. Due to the expansion of investment by multinational companies, Thailand has gradually become a major automobile producer. Cars are not only used for domestic sales, but also exported to neighboring countries in large quantities.

However, in 1997, when Thailand was hit by the Asian financial crisis, the government, in order to rescue manufacturers on the verge of bankruptcy, relaxed various restrictions on investment in Thailand, allowed foreign investors to hold 100 per cent of Thai subsidiaries, and encouraged foreign investors to acquire Thai companies on the verge of bankruptcy. As a result, Thailand's automobile industry is gradually dominated by multinational companies.

Since 2000, Thailand joined the WTO and has been trying to get rid of its dependence on Japan. On the other hand, European and American and other multinational enterprises also use the ASEAN Free Trade Zone to purchase low-priced components and other products in the region in the form of "price comparison". Low prices have won advantages for European and American enterprises among competitors and gradually gained part of the Thai market. The share of Japanese car companies in Thailand fell from 92% to 82%. It was also in this year that Thailand had the title of "Detroit of the East. Multinational companies have moved their production lines to Thailand, which has led to the formation of a complete automotive supply chain in Thailand.

Data show that there are 18 automobile manufacturers and about 700 first-class spare parts suppliers in the upper reaches of Thailand's automobile industry chain, more than 60% of which are dominated by foreign capital. More than half of the world's top 100 spare parts suppliers have set up branches or factories in Thailand, mainly producing high-end spare parts, safety and energy-saving spare parts, new energy vehicle spare parts, fuel injection systems, engine systems and transmission systems. In addition, there are more than 1700 smaller 2. tertiary parts suppliers, mainly produced by local Thai companies.

Not only production bases, multinational companies have also set up R & D centers in Thailand. In June 2003, Japan's Toyota invested 5 billion baht in Thailand to set up a research and development center to develop and produce pickup trucks (Pick-up). In July of the same year, GM established the world's largest 1-ton pickup truck production base and R & D center in Thailand.

02 acceleration electrification

for a long time, although Thailand has a history of automobile industry for many years, it does not have its own automobile brand, and Thailand does not want to develop its own brand. Thailand's auto market is still mainly controlled by Japan. Although Thailand's auto parts production has a certain level of technology, the more sophisticated parts still rely on imports.

with the gradual saturation of the domestic fuel car market in Thailand, export growth is also limited. Under the background that major automobile producing countries are competing in the field of new energy vehicles, Thailand has also proposed to transform the electric vehicle industry. Thailand is currently the most active country in the implementation of electric vehicles in Southeast Asia, and plans to become the manufacturing center of electric vehicles in Southeast Asia. According to the Thai government's goal, by 2030, Thailand's annual production of electric vehicles will reach 750,000, accounting for 30% of Thailand's total car production.

In the era of electric vehicles, whether they can gain a foothold in the Thai market will become the key to whether car companies can gain a foothold in Southeast Asia.

In the new energy vehicles hot, Thailand began to force fuel vehicle production to electric vehicle production transformation, in order to maintain Thailand in the automobile production field of international status.

in 2016, Thailand proposed the "Thailand 4.0" strategy, which listed the new generation of automobile manufacturing as the primary target industry. In 2020, Thailand established the National Electric Vehicle Policy Committee (EV Board) to further enhance the strategic position of electric vehicle development.

EV Board proposed that by 2035, focus on the three major areas of zero-emission vehicles, next-generation automotive technology, and business model innovation to build a complete electric vehicle industry chain and master advanced core technologies.

sales target for all zero-emission vehicle models in Thailand

In order to achieve the development goal of "Southeast Asia's electric vehicle manufacturing center and export base", Thailand has formulated the "30-30" policy, that is, by 2030, Thailand's domestic EV electric vehicle replacement rate must be more than 30%, while new energy vehicle production capacity also needs to reach more than 30%; Thailand's electric vehicle market is growing exponentially.

to achieve this goal, Thailand has introduced numerous incentive programmes in the past year alone.

One is the financial subsidy program. In August last year, Thailand approved a 2.9 billion baht subsidy plan budget, providing subsidies ranging from 70,000 baht to 150,000 baht for each electric vehicle.

The second is the tax relief program. In terms of consumption tax, between June 2022 and 2025, the consumption tax on electric passenger cars will be reduced from 8% to 2%, the consumption tax on electric pickup trucks will be reduced from 8% to 0%, and will be reduced to 2% from 2026 to 2035. On the road tax, the road tax for electric vehicles registered from October 1, 2022 to September 30, 2025 is reduced by 80%; During the period from 2022 to 2023, exempt the import tax concession of up to 40% for electric vehicles, and exempt the import tax on important parts such as electric vehicle batteries, traction motors, compressors, battery management systems, drive control units and reducers by 2025.

The premise for automakers to enjoy preferential policies is that they must set up a pure electric vehicle factory in Thailand and produce pure electric vehicles in Thailand equal to their imports by the end of 2025. This premise not only ensures the sales of electric vehicles in Thailand, but also promotes the development of the production chain of electric vehicles in Thailand.

In addition, in February this year, Thailand decided to invest 24 billion Thai baht to support the production of battery-grade batteries. Battery factories with a capacity of less than 8GWh will receive subsidies of 400-600 Thai baht/kWh, and battery factories with a capacity of more than 8GWh will receive subsidies of 600-800 Thai baht/kWh.

At the same time, Thailand also plans to implement a carbon tax, but also to a certain extent to promote the transformation of the automotive industry to electric.

In many preferential policies, Thailand has become a car company layout of electric vehicles an important choice. Horizon Plus, a joint venture between Foxconn and Thailand's public oil company, will build an electric vehicle factory with an annual production capacity of 50000 vehicles and plans to increase the annual production to 150000 vehicles by 2030. Horizon Plus intends to provide contract design and manufacturing services for all OEM's planning to produce electric vehicles in Thailand; EV Primus Co.,Ltd. Invest to build a factory and plan to produce electric vehicles next year; BYD will purchase land and build a factory in Thailand, which is expected to start operation in 2024, with an annual output of 150,000 electric passenger cars; Tesla has also begun to start delivery in Thailand.

Although Thailand's preferential policies continue, the electric vehicle industry is still in its infancy.

In the era of fuel cars, Japanese cars accounted for about 90% of Thailand's consumer market. As Japanese cars are the first car companies to enter Thailand's layout production line, firmly grasp the automobile industry chain, dealer channels, upstream and downstream parts suppliers and other production supply chains, many brands are difficult to challenge the status of Japanese cars. However, the electric transformation of Japanese cars is very slow and relies on hybrid models, which to a certain extent also slows down the speed of Thailand's electric transformation.

At present, Thailand's supporting facilities cannot keep up with Thailand's electric vehicle development plan. According to data from the Thai Electric Vehicle Association, as of the end of last year, Thailand had 13 charging pile brands, with 1239 charging stations and 3739 charging piles nationwide. According to the current trend, the sales of electric vehicles are faster than the construction of charging piles. With the continuous growth of electric vehicle sales, it is very likely that they will not be able to meet the charging demand of electric vehicles.

In addition, the battery factory at the core of the electric vehicle is slow to land. At present, compared with many electric vehicle production plants with production lines in Thailand, power battery companies are still relatively lacking.

Thailand's electric car market is almost "a blank sheet of paper" and has become an opportunity to break the monopoly of Japanese cars.

03 the car enterprises into the local industry chain

in China, new energy vehicle brands continue to reshuffle and competition intensifies, and going out to sea has become a choice for further development of car companies.

In Thailand, Chinese electric car brands already have a certain market advantage. Great Wall Motor CGO Li Ruifeng said at the end of last year that Chinese car brands have occupied 90% of Thailand's local new energy vehicle market share.

Participate in Thailand electric car industry chain construction, become Chinese car companies into the Thai market development an important step.

In 2013, SAIC Group and Thailand's Zhengda Group formed a joint venture company-SAIC Zhengda Co., Ltd. to produce and sell MG brand cars in Thailand. In 2019, MG Motors launched an electric car in Thailand. Data show that SAIC MG has built more than 150 charging piles in Thailand, covering more than 60 cities and regions in Thailand.

In November 2020, Great Wall Motors took over the factory of General Motors in Rayong, Thailand, and then intelligently upgraded the automobile manufacturing plant and powertrain plant to meet the needs of various power production, including traditional fuel vehicles and new energy vehicles, including hybrid electric vehicles, plug-in hybrid electric vehicles and pure electric vehicles, and will be put into production in 2021.

In addition, Great Wall Motors is also cooperating with the National Electricity Authority of Thailand and other departments to build charging stations, expand fast charging facilities, etc., and build a national electric vehicle charging network.

In 2022, BYD signed a contract with WHA Weihua Group Volkswagen Co., Ltd. to purchase land and build a factory in Thailand. BYD's Thailand plant is expected to start operation in 2024, with an annual production capacity of about 150000 vehicles. The cars produced will be put into the local market of Thailand and radiate to neighboring ASEAN countries and other regions.

In the same year, Nezha Automobile announced that it had signed a comprehensive strategic cooperation agreement with PTT, Thailand's largest petrochemical producer and trader, to develop Thailand's new energy market in the areas of "charging pile production and installation", "public charging service" and "future intended production strategic planning. Recently, the foundation of the Thai factory was laid. The Thailand factory is located in Kannayo District, Bangkok, Thailand. It is the first overseas factory of Nezha Automobile. After completion, it has an annual production capacity of 20000 vehicles and is expected to be put into production by the end of January 2024.

From the perspective of Chinese car companies in Thailand, Chinese companies intend to deeply participate in the construction of Thailand's industrial chain, help Thailand to carry out electric technology transformation and infrastructure improvement, so as to seize the opportunity in Thailand's blue ocean market.

local industry professionals also gave "Whale Dimension" analysis. In the future, Chinese car companies are also expected to use Thailand as the origin to radiate the entire Southeast Asian electric vehicle industry.