With tougher competition at home and immense growth in EVs globally, Chinese carmakers are ratcheting up exports and shifting manufacturing to Thailand.
Boyden's perspectives on the news and trends that are transforming industries
China has been the world’s biggest automotive manufacturing country and automotive market for well over a decade. Now it is becoming a top exporter as well, gaining on Japan, the world leader in volume. Last year China exported 3.1 million cars, a 54% increase year on year. Japan exported 3.2 million in the first 11 months of 2022, the South China Morning Post reports. The explosion in Chinese electric vehicles is a key factor. Analysts expect China to export 5.5 million cars in 2030, about half of which will be EVs.
Foreign expansion has become a strategic priority for Chinese carmakers as the domestic market matures and competition intensifies. Further, with the country’s economic growth cooling, the cost of attracting Chinese customers is “just so high”, says Tu Le of Sino Auto Insights, a consultancy in Detroit. Expanding in foreign markets seems a more certain route to growth. And given China’s tensions with the West, a neutral entry point in South-East Asia makes Thailand an appealing place to scale production.
Thailand has been a fundamental link in automotive supply chains for decades, beginning in the early years of Japan’s growth into a global automotive powerhouse. When giants like Toyota, Nissan and Honda embarked on expansion outside their home market, setting up production in Thailand was a pivotal step. Today Thailand is the world’s tenth-largest producer of motor vehicles – and Chinese automotive companies, including BYD, Changan and Hozon, are investing heavily in factories there.
Adding to the attraction is the economic health of South-East Asia, where Chinese carmakers plan to sell vehicles made in Thailand. Car sales in the region rose by 23% last year, according to The Economist. Meanwhile a major drive to penetrate Western markets is underway, particularly in Europe, the world’s second-largest market for electric vehicles. Chinese EVs could soon be coming to America as well.
Chinese carmakers hope their investments in Thailand will bear fruit throughout South-East Asia and the world beyond. The country received $3.4 billion in foreign direct investment from companies in China (including Hong Kong) last year, more than it received from America or Japan. Regardless of the impact these investments have on the global aspirations of China’s automotive industry, they will undoubtedly further cement its dominant position in Asian manufacturing supply chains.
