Thailand’s electrification push by throwing subsidies at Chinese electric vehicle (EV) makers isn’t paying off as it has expected, at least where forwarding the progress of the local auto industry and jobs is concerned. That’s because the country’s auto sector is now facing a situation brought about by an oversupply of EVs, and there’s a series of knock-on effects as a result of that, as Nikkei Asia reports.
According to the country’s excise department, 185,029 EVs have been brought in to Thailand since 2022 when it began its EV subsidy programme, offering Chinese manufacturers grants of up to 150,000 baht (RM19,350) per vehicle. However, land transport department data shows that EV registrations in Thailand amount to only 86,043 units, suggesting that at least 90,000 vehicles remain unsold.
This oversupply has ignited a price war, and the indirect consequence of that is the impact it has had on players in the internal combustion engine segment and local supply chains. For automakers, production cuts and plant closures have come about, and supply chains have also been affected, with at least a dozen parts producers having closed because the subsidised Chinese EV makers do not buy from the vast majority of them.
The subsidy programme also eliminated tariffs on imported Chinese EVs to be sold in Thailand, on the condition that the Chinese companies build the same number of EVs in Thailand that they have imported into the country since 2022. Manufacturing was targeted to begin this year, with the subsidised vehicles allowed to be sold domestically or exported.
BYD, which just opened its manufacturing plant in Thailand, has been the most aggressive of the six automakers that have invested under the scheme. It slashed the price of its new Atto model by as much as 340,000 baht (RM43,900), a 37% discount from the launch price of 899,000 baht (RM116,000). Neta cut the price of the V-II model by 50,000 baht (RM6,450), or 9%, from 549,000 baht (RM70,850) at launch.
Weaknesses in the broader Thai economy are also playing a role in the slump seen in the auto sector, as more people are scaling back on expensive purchases. Only 260,365 vehicles were sold in the first five months of the year, down 23% from the same period last year, and the lowest total in a decade, the Federation of Thai Industries reported.
The waves from all this have of course reached the rest of the automotive sector, which employs more than 750,000 workers and accounts for about 11% of the country’s gross domestic product (GDP), making it the fourth-largest contributor to the kingdom’s economy.
Sales of fossil fuel-powered vehicles started falling after the EV subsidies began bringing prices down. Japanese automakers were mostly affected as they make some 90% of these vehicles in the country. Earlier this month, Honda said it will halt vehicle production at its factory in Ayutthaya by 2025 and consolidate operations at its plant in Prachinburi province. The moves are part of a plan to cut annual production in Thailand to 120,000 units per year, down from 270,000 units.
Other Japanese manufacturers are halting all production completely, with Subaru having announced that it will stop car assembly operations in Thailand (and Malaysia) by the end of this year. Suzuki is set to follow suit in 2025.
The drop in scale has naturally worked its way down to auto parts makers. “Parts orders have dropped by 40% so far this year,” said Sompol Tanadumrongsak, president of the Thai Auto Parts Manufacturers Association, stating that each car assembler has “cut capacity by 30% to 40% so far this year.”
“Most local parts makers cut their operations to only three days a week as demand fell,” he said, adding that about a dozen or so had been forced out of business. Sompol said that he expects the industry to further contract as it goes through what he says will be a rough transition to EVs.
However, the idea that component and parts manufacturing can simply change tack and bring business back to local vendors is pretty much a long shot, at least in coming future. As Sompol noted, only about a dozen of the 660 Thai parts makers can supply Chinese EV makers, which either rely on imports from China or on their own lower-cost supply chains, which is the usual operating recipe for them.
To boot, the Thai government is showing no sign of changing policy direction despite the pressure on the traditional automakers and their parts suppliers. “We are glad there are more Chinese EV makers invested here in Thailand as it reflects that they are confident about our policy to support EVs,” said Narit Therdsteerasukdi, secretary general of country’s board of investment (BoI).
“However, it would be great if you could lend support to our parts producers by using some auto parts produced by Thai companies,” he said.
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Not a surprise given consumer usage patterns in ASEAN and the relatively slow to develop charging infrastructure. The simple reality of supply today is that it is so far ahead of demand it would take at least 18 months to clear all of the current EV stocks if they stopped production today. That’s obviously unsustainable and hence the price slashing but that creates a situation where everyone then takes a wait and see approach.
This is what you get for playing along with narratives played by parties with vested interest.
EV is almost a disposable product. A little knock at the undercarriage, you will need totaled it. Also with low resale value.
Wise man says only fools rush in
Yikes, hopefully this doesn’t happen here, but with new launches every week left and right at a dizzying speed who knows what’s going to happen.
Sign deal with Winnie, you get poo thrown in your face.
Those BYDs sold in Malaysia are probably worth only 50% of the current asking prices. Will wait for the price to plunge like no tomorrow before deciding to go in.