When Chinese EVs dominate a market

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Carrington Clarke (0:38)

Thailand has been called the Detroit of Asia, but now its car industry is being reshaped by China's EV boom. Vehicle production has fallen. Chinese brands now dominate the battery electric vehicle market, and local manufacturers are pushing for tariffs to protect themselves. But this isn't just a Thailand story. EV sales are surging in Australia too, and with oil prices once again surging, the economics of going electric seem to be only improving. So what can we learn from what we're seeing? Welcome to ABC Business Daily.

I'm Carrington Clarke.

Lin Lin (1:17)

And I'm ABC Business Reporter Lin Lin.

Carrington Clarke (1:19)

Lin, you've swapped sides of the table. Thank you so much for hosting while I was away. I was fascinated when I read about this this morning. I've known for a while that Thailand was trying to grapple as many previous powerhouses in the auto industry have been, with the rise in electric vehicle sales.

And Thailand is an interesting case study, isn't it? So for a long time, Thailand was very interconnected with the Japanese car industry. And a lot of Japanese car brands, car makers had set up shop in Thailand to access cheaper labor and to use it as a market to then export both in Southeast Asia. And Thailand is the biggest player in Southeast Asia but also around the world. It's tried to do a similar kind of thing with Chinese makers. So kind of inviting them in to invest in Thailand in the hope that they could kind of partner. But it appears now that these Chinese brands have been a little bit too successful for the liking of local Thai manufacturers. And we've got the Finance Minister out today suggesting that what they might be looking at is some sort of excise. Not a tariff. Yeah, not a tariff but an excise, taxed by any other name.

Looking at about a 30% level suggesting that you kind of have a three-tier system perhaps where those cars that are fully manufactured in Thailand will have no excise, whatever we want to call it. Those that are manufactured outside would have the biggest excise. Then those that are put together in Thailand, but mainly from components made elsewhere, would have some sort of a midpoint. What do you make of what's happening in Thailand? What does it tell us about the shape of the global car industry and what does it potentially mean for the future?

Lin Lin (3:06)

I think it shows where we're at, doesn't it? Because on the one hand, it shows the success we've seen so far in terms of what the Chinese EV makers have been able to achieve. Then on the other hand, it also underscores that for countries like Thailand, they want a piece of that.

As you say, I mean, Thailand doesn't, its auto industry is built on foreign manufacturers and just because of where it is geographically, it's been the Japanese and they've been so dominant when we think about petrol-powered cars. But now, things are changing and we know that when it comes to EV production, I think, globally, the Chinese EV makers make up about 75% of that and the Thais want a piece of that in their industry as well. It makes sense, doesn't it?

Carrington Clarke (3:58)

It totally makes sense. And there's obviously geopolitics playing here. Japan has obviously been concerned for a long time. A big pillar of its economy was about building cars, not only in Japan but also in these hubs around the world.

And obviously, they're under a lot of pressure. China has got the march on them when it comes to electric vehicles.

Lin Lin (4:18)

Absolutely.

Carrington Clarke (4:19)

They've tried like, when you look at something like Toyota, Toyota kind of tried to play on both sides of the streets, trying to protect its existing market. We can see it playing out here in Australia where it has been very successful with its petrol powered vehicles for a long time. It's also been looking at the hybrid model, which feels like maybe the best of both worlds, or some people say the worst of both worlds, but hasn't been as successful in moving to electric vehicles, similar to what we're seeing playing out in Europe. But how does this actually work on the geopolitical level? Because we mentioned that they don't want to call this a tariff because they have free trade agreements in place, but a tax is a tax is a tax. Obviously, China is not going to be happy about any moves by Thailand to curb its access to the market.