Chinese EV-makers rush in and upend a country's entire auto market

Bangkok: Ma Haiyang and eight of his colleagues arrived in Thailand a year ago to establish the first overseas operation for GAC Aion, an electric vehicle maker from China. They had no office, no factory, no local employees and, basically, no clue.

The Aion team set up shop in a Bangkok hotel, commandeering conference rooms and holding meetings in the lobby. They had a long list of things to do: Find office space, recruit dealers and devise a business strategy. The team worked around the clock and, 74 days after arriving in Thailand, sold its first electric vehicle.

"The window of opportunity for Chinese new energy vehicles going overseas will be relatively short," said Ma, general manager at Aion for Southeast Asia, using China's preferred phrase for fully electric and gas-electric hybrid vehicles. "This is why we wanted to hurry up," he added.

Chinese electric vehicle manufacturers such as Aion are stampeding into overseas markets. Thailand is one of the first countries to experience the sudden influx of China's automobile brands, and is confronting how their ambition and competitiveness are reshaping its car industry.

The arrival of China EV Inc. is evident everywhere in Thailand. Billboards are blanketed with advertisements for Chinese cars. Land prices are soaring because so many Chinese firms are building car factories.

The fast changes in the Thai auto market also show how Chinese companies are leaping ahead of their global rivals in Japan, which has shunned EVs, and the United States, where Tesla dominates the sector.

Last year, sales of popular Japanese brands such as Nissan, Mazda and Mitsubishi plummeted as consumers bought new electric cars from Chinese manufacturers instead. Dealers that had worked with Japanese and American automakers for decades were now turning over showrooms to make way for Chinese vehicles. Amid an increasingly crowded field, Chinese brands are slashing prices on electric vehicles.

The overseas push is the next phase in Beijing's long-term strategy to focus on new energy vehicles and upend the balance of power in the automobile industry.

After years of government support for the sector, Chinese manufacturers are adept at mass-producing electric vehicles. They have established dependable supply chains, while working out the kinks to reduce prices.

That international push has been met with tariffs in two major auto markets to prevent a glut of Chinese vehicles from crushing homegrown competitors. Last month, the European Union said it would impose tariffs of up to 38 per cent on electric vehicles imported from China into the bloc. A month earlier, the United States quadrupled tariffs on EVs built in China.

Thailand is small by comparison, but it is the biggest market in Southeast Asia. Known as the "Detroit of Asia," it serves as a regional manufacturing hub. Its proximity and strong trade ties to China also allow Chinese cars to be imported quickly and inexpensively.

"It's a beachhead market," said Tu Le, a managing director of the consultancy Sino Auto Insights. "It suits a lot of Chinese brands because of the lower price point."

In a market once considered a Japanese stronghold, a changing of the guard is already happening. Japanese automobile brands accounted for 86% of new car sales in 2022. That figure dropped to 75% last year, with China's BYD, Great Wall Motor and SAIC Motor grabbing significant market share.

In 2021, Thailand said it wanted electric vehicles to account for 30% of its automobile production by the end of the decade, an ambitious goal that seems unattainable without Chinese companies. Its government also put in place subsidies and tax breaks to spur demand.

A weak Thai economy has contributed to a significant decline in overall car sales this year. Electric vehicle sales have slowed a lot but are still up 50% over last year. Chinese automakers have responded by cutting prices, leaving some competitors worried about a race to the bottom.

Chong Baoyu, general manager of Great Wall Motor in the Thailand unit, said an all-out price war would "kill the industry" because customers would hold off on buying a vehicle, expecting prices to fall further.

"The price cut is a short-term solution but not long-term," he said.

Four years ago, Great Wall Motor acquired General Motors' factories as part of a retreat by the American carmaker.

In May, with the EU tariffs on China looming, Great Wall Motor announced that it would close its regional headquarters in Munich, citing an "increasingly challenging European electric vehicle market."

The company plans to continue operating in Europe, Chong said, but the prospect of tariffs makes Thailand an even more important market for Chinese brands.

Six Chinese electric vehicle companies are already selling cars in Thailand, and three more entrants are coming this year. BYD, Aion, Great Wall, Hozon Auto's Neta and Chery are among those that have opened or are building factories in Thailand.

"When the Chinese see an opportunity, they just go," Wirat Tatsaringkansakul, deputy secretary-general of the Thailand Board of Investment, said at an automotive conference for Chinese suppliers last month.

Japan's dominance over Thailand's automotive industry dates to the 1960s when Nissan Motor and its local partner, Siam Motors, opened the country's first car factory. Japan's support helped establish the Phornprapha family, which owns the privately held Siam Motors, as the first family of Thailand's car industry.

But even within the Phornprapha family, alliances are shifting.

Pratarnwong Phornprapha and Pratarnporn Phornprapha, the grandchildren of Siam Motors' founder, control Rever Automotive, which is the exclusive distributor for BYD cars in Thailand. BYD, China's leading EV company, competes directly with Siam Motors' longtime partner, Nissan. BYD sold more cars in Thailand than Nissan did last year, even though the Chinese automaker had only three models available.

Pratarnwong Phornprapha, who is Rever's chief executive, and Pratarnporn Phornprapha, his sister and vice chief executive, said their company was completely separate from Siam Motors, which is run by their uncle and cousin. This month, BYD said it had acquired a 20% stake in Rever for an undisclosed sum.

In less than two years, Rever has opened 110 showrooms across the country, with the goal of another 50 by the end of 2024.

Pratarnwong Phornprapha said there had been no tension within the family, because Rever was focused on electric vehicles and Siam Motors made traditional cars.

"For now, I don't think there is any conflict," he said.

The Phornprapha siblings said one of the biggest challenges they faced was to assuage concerns about the reliability of Chinese automobiles -- especially because Japanese brands are held in high regard.

"I'd be lying if I said it wasn't a hurdle when we started," Phornprapha said. "Chinese products, 10 years ago, aren't what we see today."

V Group Cars, a dealer network with 44 showrooms, said a majority of its locations sold only Chinese brands. The dealer network stopped working with Suzuki. It converted Mazda, Mitsubishi and Ford Motor showrooms into sales locations for Aion, Neta, Chery's Omoda and Jaecoo brands, and Zeekr.

Aion, in its first year in Thailand, has opened 41 showrooms and started production at a new factory this month. It has announced plans to open a plant in Indonesia and start selling its cars in nine countries across Southeast Asia.

Last month, Phanthakan Wongsa and his wife bought an Aion Y Plus sport utility vehicle at a showroom in Bangkok. They own a gasoline-powered Suzuki but wanted an energy-efficient car. Wongsa, 35, an engineer, paid around $25,000 after a government subsidy and a 20 per cent price cut.

On a recent afternoon at an Aion showroom in the eastern part of Bangkok, the company was offering a $25,000 package for the Y Plus that included an eight-year warranty, installation of a home charger and 12 months of insurance.

V Group, the dealer network, had converted the showroom from a Mazda dealership last year. Mazda sales "plummeted in recent years," said Pananya Jira-alongkorn, vice president of V Group. Thai consumers were more interested in electric vehicles, she said, and Mazda had "none to offer."

Aion adapted its Chinese cars for the local market, turning up the power of the air conditioning and strengthening the chassis for poor road conditions.

On his desk at Aion's offices in a Bangkok high-rise, Ma displayed a miniature model ship that captures the spirit of Chinese automakers prospecting for customers.

Written on the ship's sails is a Chinese phrase: "Ride the wind, cleave the waves and return with a full load."