Thailand’s electric vehicle (EV) sector faces potential setbacks as sluggish domestic car sales weigh heavily on the market. Despite a growing interest in EVs, challenges such as economic stagnation, high household debt, and price wars among manufacturers have raised concerns for the industry’s future.
Chinese EV manufacturers, key players in the Thai market, are closely monitoring the situation. High production costs and reduced local demand are causing uncertainty, even as the Thai government aims to position the country as a regional hub for EV production.
Decline in EV Registrations
New EV registrations in Thailand are expected to reach only 80,000 units in 2024, falling short of the 100,000-unit target set earlier this year. From January to August, around 48,000 new EVs were registered, marking an 11% year-on-year increase but signaling a slowdown in growth, according to Surapong Paisitpatanapong, vice-chairman of the Federation of Thai Industries (FTI).
The overall automotive sector has suffered, with domestic car manufacturing output declining by 17.3% in the first half of 2024. High household debt has prompted banks to tighten lending criteria, exacerbating the problem. The FTI reports that non-performing auto loans (NPLs) reached 254 billion baht in Q2 2024, a year-on-year rise of nearly 30%.
The FTI remains hopeful for a recovery in the final months of the year, citing government spending and gradual economic improvement. Thailand’s GDP growth is forecasted at 2.6% for 2024, increasing to 3% in 2025.
Price Wars and Market Dynamics
Aggressive pricing strategies among EV manufacturers, particularly Chinese firms, have further strained the market. While lower prices benefit consumers, they discourage immediate purchases as buyers wait for potential further reductions.
Chinese manufacturers dominate the global EV market, benefiting from extensive supply chains and cheaper battery components, such as lithium-ion materials. However, the ongoing price wars have drawn criticism. Changan Automobile, a Chinese EV maker, opposes this approach, stating it undermines consumer trust and damages brand image.
Premium brands like Mercedes-Benz Thailand are steering clear of the price competition. Martin Schwenk, the company’s CEO, highlighted that Mercedes-Benz targets a different market segment, minimizing the impact of price wars on its sales.
Managing Costs Amid Challenges
The high cost of energy and locally sourced components in Thailand has increased EV production expenses. Domestically produced parts are reportedly 10–15% more expensive than their Chinese counterparts.
Despite these challenges, Thailand remains an attractive production base due to its robust infrastructure and competitive labor costs. Manufacturers like Changan have pledged significant investments, aiming to produce 100,000 EVs annually and use Thailand as an export hub for right- and left-hand-drive vehicles.
To offset rising costs, companies are focusing on scaling production to improve efficiency. However, maintaining competitiveness will require careful cost management, particularly as domestic demand remains under pressure.