Thailand – the “capital” of the Southeast Asian automotive industry
Toyota Motor celebrated its 60th anniversary in Thailand last month with a grand ceremony at a national convention center. At the ceremony, the first Hilux electric pickup truck, a 1970 Corolla and other models produced by Toyota in Thailand were presented in front of 1,500 guests.
Speaking on stage at the introduction of Toyota’s first electric pick-up truck for emerging markets, made in Thailand, company president Akio Toyoda said: “The future of Toyota and Thailand is bright and this prospect will continue to grow. Personally, I have always considered Thailand my second home. If my job didn’t require me to live in Japan, I would live here!”
Toyota President Akio Toyoda during the 60th anniversary of presence in Thailand in December 2022. Photo: Nikkei.
Toyoda’s speech highlighted the deep relationship between the company and Thailand. No other country has invested so much in Thailand. In fact, Japanese companies have poured so much money into the country that they have created a leading regional auto manufacturing center.
Toyota and its group companies employ 275,000 people in Thailand. By some estimates, this activity accounts for as much as 4% of the Southeast Asian nation’s gross domestic product. According to JETRO (Japan Trade Promotion Organization) data, Japan accounted for 32% of FDI inflows to Thailand in March 2022 and was the largest investor.
China appeared
But structural changes in the auto industry – and in the global economy in general – raise tough questions about Japan’s relationship with Thailand.
In particular, the rise of China and its increasingly ambitious electric vehicle manufacturers has given Japan its first major competitor in a country calling itself Detroit (the former capital of the industry). American auto industry) of Southeast Asia.
A few months before Toyoda’s visit to Thailand, Chinese electric vehicle maker BYD signed an agreement to buy nearly 1 square kilometer of land in Rayong, on the east coast of the Gulf of Thailand.
The company expects to start producing electric vehicles here in 2024. Thai industrial real estate developer WHA says it is the company’s largest transaction in 25 years.
The transaction also has the potential to make China the largest investor in Thailand by 2022, overtaking Japan for the first time since 1994, according to data from JETRO.
“It shows their ambition,” said David Nardone, WHA’s executive director of industrial development. The Chinese are the most active investors and they come from a market where the market share of electric vehicles is the largest in the world.”
Electric vehicles currently account for less than 1% of new car sales in Thailand, but brands from China dominate in that small segment.
Great Wall Motor, which acquired a GM plant in Rayong in 2020, captured a 45% market share in the first nine months of 2022 with its compact and affordable electric vehicle, the Good Cat SAIC Motor of China.
Competition is expected to become even fiercer in the near future. In September 2022, Foxconn of Taiwan announced plans to produce electric vehicles in Thailand by 2024.
Chinese automakers are fueled in part by the need to circumvent trade restrictions imposed by the US as trade tensions between the US and China show no signs of easing.
“Chinese companies try to find opportunities in every potential market,” explains Nardone.
He said up to 40% of WHA’s customers in the past three years have been from China and Taiwan.
Thailand also offers a well-developed supply chain that new investors can easily take advantage of. “They all want to use Thai suppliers for metal parts, seats, interior systems, plastics,” Nardone said.
Thailand is certainly rolling out the carpet to welcome Chinese investors. Prime Minister Prayuth Chan-ocha is keen to show that Thailand’s economy is modernizing ahead of general elections scheduled for May.
The ‘battlefield’ where Asia’s two leading economies compete
Thailand is also aware of competition from regional rivals. The country has a larger amount of FDI pledged than Indonesia or Vietnam, but in terms of new investment, Thailand has overtaken its neighbors since 2014.
Moreover, Thailand suffers from a demographic disadvantage. The country has a population of 71 million compared to 97 million for Vietnam and 273 million for Indonesia.
Thailand is also the country with the oldest population in Southeast Asia, after Singapore, and this trend is expected to continue. Some experts warn that Thailand’s position in the region could be jeopardized without new labor supply and increased market size.
But that doesn’t seem to stop Asia’s two largest economies from pouring money into the country, particularly in the auto sector.
“Competition between Japan and China is likely to intensify as Chinese automakers move production to Thailand to mitigate the impact of the US-China trade war,” said Hajime Yamamoto. , predicts an automotive analyst at the Bangkok-based Nomura Research Institute.
For companies that are part of the Japanese automotive supply chain, the situation poses risks as well as opportunities.
At auto parts maker Denso, CEO Naoto Inuzuka keeps a close eye on the rapidly changing competitive landscape.
But he also sees an opportunity. “We are looking for opportunities to bring new automakers to market,” he added, referring to new investors such as BYD, Great Wall, SAIC and Foxconn.
Inuzuka said Denso is preparing to meet demand from electric vehicle manufacturers in Thailand, which he expects to begin production in 2024 – 2025, albeit on a small scale initially.
Other Japanese investors are still betting heavily on Thailand.
In November, Sony announced plans to expand production at a chip factory north of Bangkok with a 70% increase in investment capital and an increase in the number of employees from 1,000 to 3,000 by 2024. Exports image sensors used in autonomous driving systems .
Meanwhile, Honda Motor announced in November that it plans to start mass production of all-electric SUVs in Thailand by 2023. The car and motorcycle manufacturer in Thailand, Indonesia. and India, but only research and development facilities are located in Thailand.
Yamamoto, the auto expert, said Japanese automakers don’t want to go too fast. “The era of electric cars is coming,” he said. They hope that there will be a transition period long enough to build up enough capital for new investments.”
But others argue that time waits for no one.
“It’s important to take the first step,” said Stanley Kang, former president of Thailand’s Foreign Chamber of Commerce, who runs a battery charger company for electric vehicles.
He cited the smartphone industry as an example. “Today only Apple, Huawei and Samsung – no other brand can appeal to customers. That is why I say that those who come to market earlier can gain market share and strengthen their brand image.”
Source: CafeF
