Chinese manufacturers of electric vehicles (EVs) have made tremendous inroads into Thailand’s auto industry in a short time, commanding the largest market share collectively.
Their marketing strategy of offering substantial discounts, however, has angered many of the people who had bought the cars before the price cuts.
BYD, China’s largest EV-maker, has slashed prices of its models several times due partly to high competition.
In the latest bout of price-cutting last month, the prices of its model fell by 10-15% to below 1 million baht.
This infuriated buyers who had very recently paid more than 1 million baht for the same model.
They are now demanding compensation from the automaker, claiming they were kept in the dark on the impending price cut.
They have even threatened a boycott of the company’s products in the future.
The anger among the buyers was so great that the Thai government set up a committee to look into the matter.
Realising that it was proving to be a PR disaster, the company has promised them compensation.
Recently executives of BYD met with Prime Minister Srettha Thavisin, who asked the carmaker to undertake appropriate marketing campaigns.
The surge of Chinese EVs has caught many automakers off guard.
Slashing prices of new models has impacted sales of new cars as well as the used-car market.
The latter was hit hard last year, as many car buyers failed to service their instalment payments, forcing financial institutions to dump seized cars into the market, leading to a sharp fall in the prices of used cars.
Traditionally, carmarkers price their new models higher than the previous ones.
Chinese carmakers reversed that practice, which has disrupted the car market, according to Krisda Utamote, president of the Electric Vehicle Association of Thailand (EVAT).
“It not only hurt the auto industry but also car owners, who found their car value plunging. Nobody benefits from such a practice,” Krisda warned.
He urged the auto industry and regulators to discuss ways to ensure a smooth transition to EVs.
Yossapong Laoonual, honorary chairman at EVAT, said that Chinese automakers could slash prices because they could cut their production cost.
“As they produce and sell more electric cars, they can achieve large scale production, resulting in cost savings,” he said.
Compared with the car prices in China, there was room to further cut prices in Thailand.
However, it would also depend on the production costs in Thailand, Yossapong said.
Another reason electric carmakers could lower prices was due to the falling price of batteries, which is an important component of EVs.
After the recent experience, many customers may opt to wait for the next round of price cuts, he added.
Japanese carmakers retreating from Thailand?
Two Japanese carmakers — Suzuki and Subaru — have announced plans to close their manufacturing plants in Thailand. They cited slower sales.
However, Toyota executives still believe in their advantages and the company cited its success in the sale of hybrid vehicles.
Last week Honda announced that it would cease the manufacturing of vehicles at its factory in Ayutthaya province by 2025, and move operations from there to its plant in Prachinburi province.
Amid falling sales, and intense competition, Honda has seen its production decline from 228,000 in 2019 to under 150,000 a year since then.
Some experts speculate that BYD and other Chinese EV-makers would replace Japanese carmakers in Thailand’s auto market in the future.
BYD opened its first manufacturing plant outside China in Thailand on July 4 with an investment of 18 billion baht. The plant at the WHA Industrial Estate in Rayong province will have the capacity to produce 150,000 EVs per year.
Other automakers, such as MG, Great Wall Motor, Changan Automobile, GAC Aion, NETA and Foton have already made investment commitments to manufacture EVs and battery plants in Thailand.
Recently Chery Automobile pledged to build a factory in Thailand next year, according to Thailand’s Board of Investment (BOI).
Thailand is aiming to establish itself as a premier hub for EV investment. The government has pledged to manufacture zero-emission vehicles with the ambitious aim of making EVs 30 percent of total car production by 2030.
In spite of fierce competition, Thailand has managed to elevate its position as a leading producer of EVs.
In 2023, the sale of EVs from Thailand grew tenfold compared to the previous year, helping to establish the country as the largest producer of EVs in Southeast Asia, accounting for more than 75 per cent of total battery-electric vehicle (BEV) sales in the region during the first quarter of 2023, accordion to the BOI.
Concerns over future of car parts-makers
Since EVs need fewer parts compared to internal combustion engine (ICE) cars, the emerging situation could have an adverse impact on the local car parts manufacturing, which currently caters to ICE vehicles.
Supavud Saicheua, an advisor at the Kiatnakin Phatra Financial Group, warned that car parts manufacturers would certainly be adversely impacted by the emerging electric vehicle industry.
Krisda, however, was more optimistic saying that some manufacturers could take advantage of the new industry as some parts — such as car seats, and glass components — could be used for all types of vehicles.
Overcapacity in China
Many countries, especially in the West, have blamed overcapacity in China of electric vehicles and other products for flooding global markets and threatening the survival of local industries.
They also complain of the Chinese government providing unfair subsidies to Chinese firms. In response, the Joe Biden administration has imposed a 100 per cent import tax on Chinese-made EVs and the European Union has imposed multiple rates against Chinese EVs.
Most companies are facing hefty extra tariffs of between 17.4% and 38.1%, on top of the 10% duty already levied by the bloc.
Faced with high tariff barriers in the US and Europe, many Chinese carmakers may be tempted to increase their efforts to sell more cars in Thailand and other regional markets.
To protect local consumers and guard against Chinese EVs and other cheaper products, Korn Chatikavanij, a former finance minister suggested that the Thai government raise the safety standards of Chinese products.
By Thai PBS World’s Business Desk
