Thailand’s ambitious EV industry plan faces challenges as Western markets and local consumers show tepid interest. May EV sales dropped 1.5% year-on-year, as traditional car makers struggle with reduced credit and export disruptions. 

There are signs that Thailand’s ambitious EV industry vision may be buckling. A downturn in Western markets for EV cars as well as a lukewarm reception in Southeast Asia means markets for such cars are becoming more limited. In the meantime, sales of EV cars in May this year fell 1.5% year on year compared to the same month last year. All this is coming as Thai traditional car makers are feeling the pinch from reduced credit at home and export disruption abroad, caused not least by the EV car phenomenon and government climate change policies which are being rejected by real consumers on the ground.

This year, US President Joe Biden accused China of cheating concerning EV vehicles as his administration imposed punitive 100% tariffs. In the meantime, Volkswagen in China has announced a doubling of EV sales in the first quarter of 2024. Its Chief Financial Officer on April 30th told analysts that the future is electric vehicles. (Source: AutolifeThailand, Volkswagen, and the White House).

Thailand’s vision of becoming a Southeast Asian EV hub is now under the microscope. It comes with a significant sentiment in Western markets against EVs.

In addition, most of the country’s EV investments and manufacturers, so far, are linked to China.

Certainly, there are Western firms such as Mercedes-Benz.

Mercedes Benz only sold 24 EV cars registered in Thailand in May 2024. There was one Volkswagen sold, an ID Buzz model with a price tag of over ฿4.5 million

For instance, the renowned German maker recently announced a 10-year contract extension with its Thai-based manufacturing partner in the kingdom.

The announcement touted the manufacture of EV vehicles. Undoubtedly, the firm likes to be seen as part of the new ‘green’ transition in Thailand.

However, the bulk of Mercedes-Benz cars manufactured in Thailand are still internal combustion engine cars.

These highly prized cars among Thailand’s elite have long proven themselves. At the same time, for instance, in May, Mercedes-Benz sold a total of 24 EV vehicles in the kingdom.

In the meantime, the EV sector in Thailand’s trade links and strong association with China may become problematic. In turn, this may make Thailand a target as the US seeks to block imports from the communist country.

EV sector’s links with Chinese-owned firms may prove problematic as, worldwide, China faces tariff barriers to its cheaper EV cars. Offshoring will not fly 

Recently, Chinese-owned factories in Thailand have ceased the production of solar panels after the US let an exemption for Thailand, Vietnam, and other countries expire.

Certainly, Chinese firms will not be allowed to offshore production to Thailand and access Western markets.

The reason is generous state subsidies to Chinese EV manufacturers being provided by Beijing. This includes direct subsidies, capital and cheap land.

Presently, the economic tussle between China and the United States has escalated. Unquestionably, it can now be aptly described as a full-blown trade war.

The Americans have recently imposed tariffs on Chinese-made computer chips and other components. For instance, not only are Chinese EV cars facing a punitive 100% tariff stateside, but so are internal combustion engine (ICE) cars.

In turn, this has prompted Federation of Thai Industries (FTI) Chairman Kriengkrai Thiennukul to warn of ripple effects from the trade war on Thailand’s already vulnerable manufacturing sector. 

He pointed out that punitive tariffs on Chinese ICE car exports will hurt Thai component makers who supply Chinese manufacturers of such vehicles.

Inevitably, Thailand faces further impact. Its current unaligned policy is already threatened. Thai firms face disruption from trade tensions between two blocs

Additionally, it is becoming increasingly clear that Thailand’s economic policy of balanced engagement may hinder the country as the trade war morphs into distinct worldwide blocs and alliances.

A policy of engagement with just one bloc may offer planners the advantage of predictability. However, with the kingdom’s proximity and existing trade links to China, it effectively is sliding into Beijing’s orbit. This has serious implications in the longer term

However, in the short term, Thailand’s planners will be dismayed by the latest figures for EV sales in the kingdom.

Certainly, it must be said that they are up 31.12% for the first five months of 2024.

However, the current trajectory means Thailand is unlikely to meet its target of 130,000 vehicles sold in 2024.

Neither does the current trend augur well for the country’s plans to eventually produce up to 750,000 EV cars a year in Thailand.

For the purposes of our reporting, EV cars mean electric-only cars.

This excludes hybrid or what are termed HEV cars. Essentially, these still use fossil fuels.

In short, they are essentially internal combustion engine cars with an electric alternative drive. Previously, EV cars have been reported on this basis when we saw a surge last year.

Only 5,474 EV cars were sold in Thailand in May. Certainly, it was 33.9% higher than April but at the same time, 1.5% lower than the same month last year

In May 2024, 5,474 EV cars were sold.

Of course, this was a significant increase on the dismal performance in April when only 4,088 cars were shifted. At the same time, the figure is 1.5% lower than the same month last year. This is not the meteoric market surge that Thai planners have been expecting.

Indeed, the trend is being mirrored worldwide with EV sales down in the United States and key European Union countries. More significantly, EV sales as a percentage of overall car sales are slipping.

For instance, in Ireland during May, EV sales plummeted by 40% as consumers switched off.

In China, where over 50% of cars on the roads are now EV models, sales in March were up by over 10%. Significantly, the rate of growth declined.

Volkswagen’s Finance Chief on April 30th insisted the ‘future will be electric’ and revealed that orders for VW EVs doubled for the first quarter in China

Nonetheless, there is a conflicting view.

Proponents of EV vehicles argue that the current problems relate to price differences and the trade war itself. They suggest that things will pick up in 2025.

For instance, on April 30th, Volkswagen (VW) Finance Chief Mr Arno Antlitz was adamant.

Addressing journalists and financial analysts, he proclaimed: ‘The future will be electric, this is our conviction.’ At the same time, he said new orders for VW EVs in China had doubled in the first quarter.

He was speaking as the company presented its earnings statement.

Volkswagen presently only sells one model in Thailand. The Volkswagen ID Buzz is an exciting people carrier based on the iconic Volkswagen van from the 1960s era.

However, the price is over ฿4.5 million. This is a luxury vehicle and comes with a highly-valued brand just like Mercedes.

The firm has sold only twenty-two in Thailand this year and just one in May.

Germany is among a number of European Union countries that oppose the bloc’s punitive tariffs on Chinese-manufactured EVs which have been unveiled

In short, this may explain the strong opposition by Germany to moves by the European Union to impose tariffs on Chinese EVs.

This was announced this week by the European Union Commission. The Germans were joined by Hungary and Sweden in opposing the move.

Despite this, however, EV sales in Germany have shown a decline in 2024, down 1.5% year on year and 14.1% for the first quarter.

The move by the European Union comes following an investigation. The 27-member bloc is immediately to apply a 21% tariff and 38.1% rate on Chinese firms. The former for firms who cooperated with its probe, the latter for those who did not.

It is anticipated that later in the year, the European Union will finalise these tariffs. Certainly, it is predicted that even further conditions will be imposed on Chinese EV imports to match the level of duties imposed by the United States.

US President Joe Biden accused China of ‘cheating’ and flooding the American market with cheap EVs. His comments come as EV sales stateside begin to fall

Meanwhile, in America, President Joe Biden has insisted that the US move is not protectionism. He accused China of cheating.

‘They’re flooding the market. It’s not competing, it’s cheating,’ he claimed.

China began developing electric cars in 2010 and is understood to have a better grasp of the production of such vehicles. At the same time, the communist country has more successfully rolled out EV cars which are now at least one in two vehicles on its roads.

From Thailand’s point of view, it certainly will not be able to sell EV cars to European and US markets in the long term if the models are manufactured by Chinese firms. In essence, the brewing trade war is a real threat to Thailand’s ambitions.

Australian government for now will not impose tariffs on Chinese EV cars which control 80% of the still growing market there with 87,000 cars sold in 2023

For instance, the Rayong factory owned by Great Wall Motors produces the Ora Good Cat car, one of the most popular EV cars in Australia. At this time, 80% of EV cars in Australia are made in China.

Australia for now will not impose tariffs on Chinese-made EVs which have captured 80% of the electric mobility market down under. Australians bought 87,000 EVs in 2023, triple the number of the year before.

In addition, sales were ahead of 2023 for the first four months of 2024. However, the market share for EVs is slipping in a buoyant market. Previously, Tesla has dominated the market supplied from China

In contrast to the United States and Europe, the Australian government has no plans at this time to impose tariffs. Undoubtedly, this is because it no longer has its own automotive sector.

However, that may be subject to change. While the Australians talk about pursuing World Trade Organisation (WTO) rules, it would be wrong to rule out the possibility of it joining the other Western countries.

The Department of Foreign Affairs and Trade (DFAT) recently told the ABC network in Australia that it would eventually be a matter to be decided in the ‘national interest.’

Thailand’s market for EVs is presently levelling out if not already gone into decline. Meanwhile, EV cars are being roundly rejected in Western markets

In the meantime, EV sales in Thailand are undoubtedly levelling out while they are in decline across the Western world.

This is a market reaction to the product on offer. Essentially, a growing rejection by motorists and consumers.

Clearly, if Thailand cannot sell EV cars at home, it will not be exporting them to China. Meanwhile, EV car sales have been lukewarm in Southeast Asia.

While they rose by 11% in 2023 in Malaysia, the number of cars sold only amounted to 10,159 units.

Prime Minister Anwar Ibrahim’s modest target of 15% of cars being EVs by 2030 is unlikely to be met.

An absence of a charging network and the usual issues such as range anxiety and fears of broken batteries have made Malaysians wary of EV cars.

In the meantime, Thailand has sold 31,851 EV cars in the first five months of 2024. It looks like it may only sell 77,000 for the year which would be significantly lower than in 2023 and only 60% of what is projected.

The current trend indicates this and the distinct possibility that sales may be lower in 2024 than in 2023.

In the meantime, the kingdom’s well-established ICE automotive industry is declining. This industry, built up primarily in association with Japanese manufacturers, also spawned an extensive and impressive component sector.

Thailand’s traditional automotive sector left reeling

These firms are now under severe pressure with declining ICE car sales.

This is being caused by tightened credit conditions but also by the existential crisis created by the EV car sector on the future of mobility in Thailand.

The announced closure of manufacturing facilities for Subaru and Suzuki over the last week has brought this home. It coincides with severe problems within the wider manufacturing sector.

Government targets failing manufacturing base with a carbon tax on output to fight the climate change crisis
Lack of coherence in government policy is the root cause of Thailand’s massive economic problems
Drivers in Thailand are turning their backs on the EV hype. Sales in April were down further at 18.4% from March
Disturbing questions that must be confronted over Thailand’s reeling economy are China and EV cars

Unquestionably, it is not just Thailand that is experiencing this phenomenon.

However, very few countries have had such an entrenched and valuable automotive industry. That industry is now being pulverised by both internal economic problems and external developments.

Thai government’s talk of a transition to a new ‘green’ and ‘clean’ industry is not materialising certainly not in terms of critically needed mass employment

In summary, these negative developments include extremely harmful economic impacts of climate change policies in Thailand and the widening US-China trade war.

Notwithstanding this, the government talks of a new cleaner industry to replace the jobs that are being lost.

However, by and large, they have not materialised. A 2021 survey showed only 2% of Thai industry was Industry 4.0.

Therefore, the time has come to analyse closely the policies of Thailand’s government including their real and practical implementation beyond the jargon.

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Further reading:

Government targets failing manufacturing base with a carbon tax on output to fight climate change crisis

Lack of coherence in government policy is the root cause of Thailand’s massive economic problems

Disturbing questions that must be confronted over Thailand’s reeling economy are China and EV cars

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