In return for Chinese investment, the Thai government has pledged to subsidise buyers of Chinese electric vehicles up to $2,800
China, which already dominates exports of electric vehicles, has been given a further boost to the industry. An agreement has been reached with the Thai government that will make Chinese-made cars more affordable for consumers in Southeast Asia’s second-largest economy. In doing so, electric vehicles will no longer be entirely Chinese, Fortune magazine reported.
As China’s economy slows and the domestic car market becomes saturated, automakers are increasingly turning to foreign markets to keep sales strong. Chinese car exports rose 58 per cent last year, according to government figures.
In order to strike a new deal with the Thai government, dubbed EV3.5, major Chinese carmakers have agreed to build factories and move some of their production to Thailand.
In exchange, the Thai government has pledged to subsidise buyers of Chinese-made electric cars up to $2,800. This will make Chinese electric cars even cheaper. Last year, the largest manufacturer introduced an electric model priced at just US$11,000.
“The EV3.5 agreement underscores the Thai government’s determination to pursue a consistent policy to support Thailand’s role as a centre for electric vehicle production in the region,” said Narit Theerdsteerasukdi, secretary-general of the Thailand Investment Board.
Boosting the industry with subsidies
The Chinese government has boosted domestic electric vehicle production with generous subsidies, which has sparked a boom: Chinese manufacturers produce more than 60 per cent of the world’s electric vehicles and last year, the country overtook Japan as the world’s biggest car exporter. Meanwhile, Shenzhen-based manufacturer BYD just overtook Tesla as the world’s biggest seller of electric cars.
Most suppliers control the entire supply chain, including the procurement of rare materials needed to make the batteries. Together with government aid, this allows the cars to be sold at prices far lower than foreign rivals.
But China’s rapid rise is coming under scrutiny. EU regulators began probing China’s car industry this month, questioning whether subsidies have given it an unfair advantage in the export market.
“The price of electric cars is kept artificially low by huge government subsidies. This distorts our market,” European Commission President Ursula von der Leyen said last autumn.
Meanwhile, Beijing intends to take “decisive measures” to address the “blind” construction of new electric vehicle production facilities by some local carmakers and authorities. Blind means exceeding actual demand, explained Deputy Minister of Industry and Information Technology Xin Guobin.
The increase in electric car exports to Southeast Asia gives Chinese carmakers a chance to continue expanding without facing possible European regulations or slack sales in the domestic market.
Experts say Thai electric car sales will double in 2024 after three years of big growth. Taking advantage of emerging electric vehicle markets is key to sustaining the growth of Chinese manufacturers.
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