Thailand's sluggish car market still attracts Chinese investment

A raft of issues hindering EV industry in Thailand. (Photo: iStock)

Thailand's weak automotive market may hinder the development of electric vehicles (EVs). After revising its car production targets for the year, the Federation of Thai Industries (FTI) has also lowered its forecast for new EV registrations, citing three main factors: slow economic growth, price wars among car manufacturers, and rising production costs.

Thailand's car market faces headwinds

Known as the "Detroit of the East," Thailand is a key automotive production hub in Southeast Asia. However, automakers have reduced output due to sluggish sales. Statistics show that between January and June this year, Thailand produced 761,240 vehicles, a 17% decrease compared to the same period last year. As a result, the FTI has adjusted this year's production target to 1.7 million vehicles, 200,000 fewer than originally expected.

Surapong Paisitpatanapong, Vice Chairman of the FTI, stated that the Thai automotive industry remains in a downturn, and it is unlikely that EV sales will meet the target. The FTI has revised its forecast for new EV registrations to 80,000 units this year—still an increase compared to last year, but 20,000 fewer than previously projected.

The sluggish car market in Thailand is partly due to the country's slow economic growth. Surapong pointed out that stagnant household incomes are affecting consumer purchasing power, with many struggling to pay off loans, which has led banks to tighten car loan standards. Statistics show that in Q2 this year, non-performing loans (NPLs) for vehicles totaled 254 billion THB (approximately 7.2 billion USD), a 29.7% increase compared to the same period last year.

However, Surapong noted that government stimulus measures are expected to ease household debt and help stabilize the car market. The Bank of Thailand forecasts GDP growth of 2.6% this year, with an additional 3% growth expected next year.

Chinese car manufacturers disrupt Thai market

Another challenge comes from the price wars initiated by EV manufacturers, which have had an unintended negative effect. Instead of stimulating demand, these price cuts have led consumers to delay their purchases in hopes of further price reductions. Senior executives from car manufacturers have said that many potential buyers are waiting for certain brands to lower their prices further.

Chinese manufacturers, already dominant in the EV sector, have instigated price wars in Thailand's EV market. For instance, the price of EV batteries dropped by 10%-14% last year, which has not only hurt Thai automakers but also negatively impacted some Chinese brands. Shen Xinghua, Southeast Asia Managing Director at Changan Automobile, stated, "The tactic, used by certain Chinese EV manufacturers, only damages consumers' trust in car brands and can mar the image of Chinese EVs.”

BYD opened its first Southeast Asian factory in Thailand in July. The entry of Chinese automakers into the Thai market has ignited a price war. (Photo: BYD)

A third issue affecting EV development in Thailand is the higher production costs linked to local sourcing requirements. Shen Xinghua explained that parts in Thailand typically cost 10%-15% more than those sourced from China. Additionally, Thailand's energy prices are higher than in other Southeast Asian countries, such as Vietnam, which further increases production costs for EVs.

Despite these challenges, Shen emphasized that Thailand's solid infrastructure and lower labor costs compared to China make it an attractive investment destination for EV production. Changan continues to invest in local EV production in Thailand. Similarly, Chinese EV giant BYD announced in July that it would open its first Southeast Asian factory in Thailand, attracted by the country’s clear EV development strategy.

Source: Bangkok Post、Reuters