China’s Great Wall Motor (GWM) has announced the official opening of a plant in Thailand. The company acquired the plant from General Motors (GM) in 2020 and has been working to make it smarter by installing advanced AI-based equipment. It is the company’s first smart factory to be opened in Southeast Asia. The amount of investment for the renovation has not been disclosed, but the company has indicated that it plans to invest 22.6 billion baht (about 79 billion yen) in Thailand.
The production capacity is 80,000 units per year, and it is expected to produce HVs first. In the future, the plant will also produce EVs. The company plans to allocate 60% of the vehicles produced to the Thai domestic market and 40% for export to neighboring countries in Southeast Asia and Australia.
GWM announced in March that it would open 17 showrooms in Thailand, and it plans to increase the number of showrooms to 30 by the end of 2021, aiming to capture a share of the Thai market where Japanese cars account for about 90% of the market. The company has production bases mainly in China, but also in Malaysia and Ecuador. The plant in Rayong Province is its first production base in Thailand. The company plans to position Thailand as its production and sales base for electric vehicles in Southeast Asia and increase its presence in the region.
Source: The Nikkei
PSR Analysis: Chinese brands are challenging the Southeast Asian market, where Japanese brands have long held an overwhelming share. Thailand in particular is a stronghold of Japanese automakers, and we are at a crossroads to see how the market share structure in the region will change in the future, or whether it will remain the same.
Unlike other Southeast Asian countries such as Malaysia, Thailand did not have a national car concept to manufacture cars on its own and has been building its industry by accepting foreign automakers.
The first Japanese automaker to enter the country was Toyota, which established its Bangkok office as a sales base in 1957. Toyota and Nissan set up their production bases in 1962, followed by Honda and Isuzu due to the Thai government’s policy of inviting them to the country. Toyota was aware of the need to localize its business from an early stage and had a long-term vision for the development of the entire Southeast Asian region. Honda positioned itself as an export base in the region and started out with two-wheeled vehicle related business.
From the mid-1960s onward, Japanese manufacturers began to play a major role in the Thai automobile industry, replacing European and American manufacturers. Subsequently, Thailand overcame the currency crisis of the 1990s and 2000s and succeeded in developing local parts manufacturers with international-level automobile production capacity and the ability to supply parts for international-level automobiles. As such, Thailand’s automobile manufacturing industry, which has historically had a close relationship with Japan, may undergo a major change in the future. Great Wall Motor’s entry into the market may be a trigger for this.
In 2017, the Thai government set the industrial goal of “Thailand 4.0”. This is aimed at attracting foreign investment in high-value-added, cutting-edge industries to further upgrade domestic industry. Within this Thailand 4.0, the government plans to make Thailand a production base for electric vehicles, with the aim of popularizing electric vehicles in the country and expanding exports.
Of course, government subsidies and tax incentives for companies moving into the country are already in place. Great Wall Motor will manufacture HVs and EVs at this Thai plant and will compete head-to-head with Japanese manufacturers. The biggest focus will be on price. It is a well-known fact that the Southeast Asian market is particularly strict about costs. If they can introduce high quality eco-friendly vehicles at a reasonable price, it could be a big threat to other automakers. The current automotive market is undergoing a major transition where anything can happen in any sense, and of course Southeast Asia is no exception. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
