The Detroit of Asia now wants a shot at electric vehicles

In 1961, a boxy sedan called the Ford Cortina started Thailand’s car industry with local workers assembling the cars using parts shipped from Britain. A few years later, Toyota Motor Corp. and Nissan Motor Co. set up factories, beginning a decades-long expansion that made the country the third-largest automaker in Asia, and No. 10 in the world.

That position earned Thailand the nickname “the Detroit of Asia,” and with it came a comprehensive supply chain to fuel the production of traditional internal combustion engines. In the space of 50 years, Thailand has gone from being a knock-down assembly, where a complete vehicle is assembled from an imported kit, to being home to end-to-end manufacturing in 18 plants across the country with thousands of parts suppliers.

Now that electric vehicles are beginning to replace combustion engines, the country is again turning to overseas partners to maintain its footing in the global industry. While Ford Motor Co. of the US and Toyota of Japan were early movers in the industry in the mid-20th century, there are now new names like Taiwan’s Foxconn Technology Group, China’s BYD Co. and Contemporary Amperex Technology Co. ( CATL) 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-stage plan to achieve this: first, entice consumers to switch to electric vehicles no matter origin, and then tip the balance in favor of domestic models.

Established subsidies for purchases are key to boosting demand initially. A reduction in import tariffs and excise duties will make all electric vehicles more competitive than their combustion counterparts. But from 2024, those incentives will be reduced (effectively, import tariffs on whole cars will be reinstated, but lower tariffs will be charged on key parts) and production quotas will be implemented, so that electric vehicles made in Thailand are more competitive than the two foreign electric models. and all ICE vehicles.

However, if it wants to remain a world leader in vehicle manufacturing, Thailand has no choice but to build a stronger technology ecosystem.

“The government needs to maintain the auto industry supply chain, because it is going to impact 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 are talking about 600,000 people in the country’s automotive industry and more than 10,000 companies.”

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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 was given a simple mandate: find new opportunities that allow PTT to enter the business of electric vehicles.

“Because we are a state-owned company, we must participate in the development of 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 managing projects that establish oil and gas infrastructure. But in Thailand’s electric vehicle sector, everyone is new to the game.

That includes one of Arun Plus’s biggest partners. Last year, the company signed a $1 billion deal(1) with Foxconn to develop and manufacture electric vehicles in Thailand, with its factory due to be completed by 2024. Although it is the world’s largest contract electronics manufacturer and A key global provider of iPhones, PCs and networking equipment, the Taiwanese company has yet to become a player in the electric vehicle assembly business. It currently provides partially finished components and modules for use in vehicles produced by automotive customers such as Tesla Inc.

Arun Plus’s role in the new company, called Horizon Plus, will be to build the factory and infrastructure, while Foxconn will manage operations and handle 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, connecting with Thai real estate development and logistics conglomerate WHA Group. That company hopes to start production in 2024 to make electric vehicles for export, the company announced earlier this month. The deal brings the total capacity of various announced companies in Thailand to 830,000 electric vehicles a year. By contrast, the country had the capacity to manufacture 4.1 million vehicles in 2019, according to data compiled by Krungsri Research.

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The real struggle for BYD, Foxconn and their local partners, however, will not just be setting up new factories and assembling cars, but building from scratch a supply chain that requires lots of new parts.

While combustion engines revolve around heavy metal blocks with pipes that include hoses for water, fuel, and air, electric vehicles are more akin to a PC on wheels. That means more electrical cables, 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 have massive factories.

About 70% of the parts that go into an ICE vehicle are sourced locally, and half of that 70%, such as steering wheels, tires and chassis, can easily be used in electric vehicles, estimates Ekachai of Arun Plus.

But it is the new components that Thailand lacks, especially batteries, and those that require electronics companies such as Foxconn, CATL and BYD to establish new supply chains. While the country has a small base in technology manufacturing, including Delta Electronics Thailand, the local subsidiary of the Taipei-based manufacturer, it still lags behind Taiwan and China.

That means that if Thailand wants to maintain its place as the Detroit of Asia, it will also have to work to become the Shenzhen of Southeast Asia.

More from this writer and others at Bloomberg Opinion:

• Why the iPhone is missing from Foxconn’s Asian tour: Tim Culpan

• The holes in America’s Chinese-style electric vehicle policy: Anjani Trivedi

• Clean Tech Returns: Elements by Liam Denning

(1) Total investment is expected to be in the range of $1 billion to $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 columnist for Bloomberg Opinion who covers technology in Asia. Previously, he was a technology reporter for Bloomberg News.

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