This position has earned Thailand the nickname “The Straits of Asia”, and with it has come a complete supply chain to power the production of traditional internal combustion engines. In the space of 50 years, Thailand has gone from knock-down assembly – where an entire vehicle is assembled from an imported kit – to hosting end-to-end manufacturing in 18 factories across the country. with thousands of parts suppliers.
Now that electric vehicles are beginning to replace combustion engines, the country is once again looking to foreign partners to maintain its position in the global industry. While Ford Motor Co. of the United States and Toyota of Japan were early movers in the industry in the mid-20th century, new names like Foxconn Technology Group of Taiwan as well as BYD Co. of China and Contemporary Amperex Technology Co. ( CATL) are now eager to help.
A cornerstone of the government’s policy is its 30:30 target: 30% of vehicles produced will be electric by 2030. It has a two-step plan to get there: first, get consumers to switch to electric vehicles, whatever their origin, and then tip the scales in favor of domestic models.
The subsidies in place for purchases are essential to stimulate demand in the first place. A reduction in import duties and excise taxes will make all electric vehicles more competitive than their combustion counterparts. But from 2024, these incentives will be reduced (in effect, import duties will be reinstated on complete cars, but lower rates applied to key parts) and production quotas will be put in place, so that Electric vehicles made in Thailand will be more competitive than the two foreign electric models. and all ICE vehicles.
Yet if it wants to remain a world leader in vehicle manufacturing, Thailand has no choice but to build a more robust tech ecosystem.
“The government needs to maintain the automotive industry supply chain because it is going to affect about 10% of our GDP if we do nothing and lose it,” said Ekachai Yimsakul, managing director of Arun Plus Co. ., which develops and promotes the local electric vehicle industry. “We’re talking about 600,000 people in the nation’s auto industry and over 10,000 companies.”
Arun Plus was created by PTT Pcl – a state-backed oil and gas conglomerate that also operates more than 2,000 service stations across the country – and given a simple mission: to find new opportunities for PTT to enter the electric vehicle business.
“Because we are a public company, we need to be involved in developing the EV ecosystem for the country,” Ekachai told me during a recent conversation at the company’s headquarters in Bangkok. Like PTT itself, Ekachai is new to the electric vehicle industry, with experience in managing oil and gas infrastructure development projects. But in Thailand’s EV business, everyone is new to the game.
This includes one of Arun Plus’ largest partners. Last year, the company signed a $1 billion(1) deal with Foxconn to develop and manufacture electric vehicles in Thailand, with their plant to be completed by 2024. Although this is From the world’s largest contract electronics manufacturer and a key global supplier of iPhones, PCs and networking equipment, the Taiwanese company has yet to become a player in the electric vehicle assembly business. It currently supplies partially completed components and modules for use in vehicles produced by automotive customers such as Tesla Inc.
Arun Plus’ role in the new venture – called Horizon Plus – will be to build the factory and infrastructure, while Foxconn will manage operations and manage the supply chain. Arun Plus also signed with CATL, one of the world’s largest battery manufacturers, to produce energy storage systems that would be sold to Horizon Plus.
China’s BYD is taking a similar approach by teaming up with Thai logistics and property development conglomerate WHA Group. This company plans to start production in 2024 to manufacture electric vehicles for export, the company announced earlier this month. The agreement brings the total capacity of various companies announced in Thailand to 830,000 electric vehicles per year. By contrast, the country had the capacity to manufacture 4.1 million vehicles in 2019, according to data compiled by Krungsri Research.
Yet the real fight for BYD, Foxconn and their local partners will not just be to create new factories and assemble cars, but to build a supply chain from scratch that requires lots of new parts.
While combustion engines revolve around heavy blocks of metal with plumbing that includes water, fuel and air hoses, electric vehicles are more like a PC on wheels. That means more electrical wires, precision sensors and dozens of electronic components – the kind of products readily available in Shenzhen, the tech manufacturing hub of southern China, where BYD and Foxconn both run huge factories.
About 70% of the parts that go into an ICE vehicle are sourced locally, and half of that 70% – like steering wheels, rims and chassis – can easily be used in electric vehicles, estimates Ekachai of Arun More .
But it’s the new components that Thailand is lacking – notably batteries – that are forcing electronics companies such as Foxconn, CATL and BYD to set up new supply chains. Although the country has a small tech manufacturing base, including Delta Electronics Thailand – the Taipei-based manufacturer’s local subsidiary – it still lags behind Taiwan and China.
This means that if Thailand is to retain its place as the Detroit of Asia, it will also have to strive to become the Shenzhen of Southeast Asia.
More from this writer and others on Bloomberg Opinion:
• Why the iPhone is missing from Foxconn’s Asian tour: Tim Culpan
• Holes in US policy on Chinese-style electric vehicles: Anjani Trivedi
• The return of clean technologies: Elements by Liam Denning
(1) Total investment is expected to be between $1 billion and $2 billion
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More stories like this are available at bloomberg.com/opinion