China’s already-dominant EV exporting empire got yet another boost yesterday, as an agreement was finalized with the Thai government that will make Chinese-made cars even more affordable for consumers in Southeast Asia’s second largest economy. It will also render them not fully Chinese-made anymore.
As the Chinese economy slows down and the domestic auto market becomes saturated, carmakers are increasingly looking to foreign markets to keep sales numbers up—Chinese auto exports jumped 58% last year, according to government data.
To strike this new deal, called the EV3.5 subsidy scheme, major Chinese auto manufacturers agreed to build factories and shift some of their production to Thailand. In exchange, the Thai government will pay consumers up to $2,800 if they buy a Chinese-made EV. That will make bottom-dollar Chinese cars even cheaper—a major maker unveiled an electric model starting at just $11,000 last year.
“The EV 3.5 measure emphasizes the determination of the Thai government to drive a sustained policy in supporting Thailand’s role as an electric vehicle hub in the region,” Thailand Board of Investment secretary general Narit Therdsteerasukdi said last fall, as the deal was being negotiated.
Subsidy-driven boom
The Chinese government has spurred domestic EV production with generous subsidies that created a boom: Chinese manufacturers produce over 60% of the world’s electric cars, and the country overtook Japan as the world’s largest auto exporter last year. Meanwhile, Shenzhen-based manufacturer BYD just overtook Tesla as the world’s largest EV seller.
Most suppliers control their entire supply chain, including sourcing the rare materials needed to make batteries. Along with government aid, that has allowed them to sell cars at prices far below their foreign competitors.
But China’s meteoric rise is coming under scrutiny. EU regulators launched a probe into the Chinese auto industry this month, questioning whether subsidies have given it an unfair advantage in the export market. “Their price is kept artificially low by huge state subsidies. This is distorting our market,” European Commission president Ursula von der Leyen said last fall.
China is responding, as well. Xin Guobin, vice minister of industry and information technology, was reported by the Financial Times to have said that Beijing will take “forceful measures” to address “blind” construction of new EV projects by some local carmakers and authorities—blind meaning in excess of actual demand.
Increasing exports into Southeast Asia offers Chinese carmakers a way to continue expanding without having to contend with possible European regulations or a domestic sales lull. Experts say that Thai EV sales could double in 2024 after three years of big growth. Taking advantage of emerging EV markets will be key if Chinese manufacturers are to sustain their growth.
