BANGKOK — Japanese companies established Thailand’s auto industry virtually from scratch, dating back to the years after World War II. By the late 1970s, Japanese brands commanded around 90% of car sales in Thailand. They invested in building Thai supply chains, and their cars were also widely perceived by customers as reliable.
In the 1990s, American and South Korean automakers targeted the Thai market but barely made a dent in Japan’s share.
Now Japanese automakers’ stronghold is finally being loosened by Chinese manufacturers that offer something they don’t: electric vehicles at affordable prices. The influx of Chinese brands such as BYD, Great Wall Motor, and SAIC Motor in the past two years is ringing alarms in Japan.
In December, Prime Minister Srettha Thavisin of Thailand traveled to Japan with a message for Japanese companies: Move quickly, invest in electric vehicles, or lose out to China.
“You are not alone in the world,” Thavisin warned Japan’s automakers in an interview with Japanese media.
Japanese companies’ unwillingness to fully embrace electric vehicles, which are popular in Thailand, has held them back in the Thai market. Mazda, Mitsubishi, Nissan, Suzuki, and Isuzu have taken the heaviest blows, in part because of their limited lineups of plug-in hybrid or fully electric models. Last year, new car sales in Thailand for those companies collectively dropped 25% while overall sales fell 9%, according to data compiled by MarkLines, an automotive information provider.
This month, Honda announced it would cease vehicle production at one of its two factories in Thailand next year. And Suzuki said in June that it would close its only vehicle-manufacturing plant in the country.
Japanese manufacturers, which account for about 75% of vehicle sales in Thailand, are taking steps to stem the erosion of their position. During Thavisin’s trip to Japan, Toyota, Honda, Isuzu, and Mitsubishi said they would invest $4.3 billion over five years to convert their Thai factories to make electric vehicles. Late last year, Honda began producing electric vehicles in Thailand.
Nissan established Thailand’s first Japanese auto assembly plant in Bangkok in 1962, a time when Thais bought only a few thousand vehicles a year. Toyota followed shortly after, starting vehicle production in Thailand in 1964.
From early on, the Japanese companies viewed Thailand as a regional export hub for Southeast Asia. They spent decades investing to develop Thai supply chains and sales networks, predominantly for pickup trucks that are exported and sold domestically. Japan’s strategy paid off in the 1980s and 1990s in particular, when Japanese automakers cashed in on booming demand in Southeast Asia while the United States and Germany were largely focused on Eastern Europe.
Southeast Asia, including Thailand, stands as the largest market for Mitsubishi and other smaller Japanese automakers. In the fiscal year that ended in March, Mitsubishi’s sales in the region fell 9% from the previous year.
Mitsubishi and other Japanese automakers are pinning hopes on developing new hybrid and electric models to regain lost ground. In February, Mitsubishi introduced a hybrid version of its Xpander multipurpose vehicle in Thailand, and the company said orders had surpassed expectations.
But the Chinese electric vehicle companies face formidable competition.
GAC Aion, the EV arm of the state-owned Guangzhou Automobile Group, has quickly established a manufacturing and sales business in Thailand and is trying to break into another Japanese stronghold: taxis. Toyota accounts for the vast majority of taxis on the road in Thailand.
Through a Thai partner, Gold Integrate, Aion has released a fully electric sedan dedicated solely to the country’s ride-hailing and taxi markets.
Over the past year, the Aion-Gold Integrate partnership has sold several thousand taxi-only models to commercial customers in Thailand for about $25,000 with a nine-year warranty.
Huang Yongjie, chair of Gold Integrate, which also invested in 15 showrooms for Aion, said Toyota had responded to Aion’s entry into the Thai market by cutting the price of its main taxi model by nearly $3,000. It was notable, Huang said, because “Toyota never cuts prices.”
This article originally appeared in The New York Times.
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