In the EV future, Thailand, the 'Detroit of Asia,' could be a key China hedge for automakers

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In this article TSLA Follow your favorite stocks CREATE FREE ACCOUNT Visitors inspect a Tesla Model Y car during the 40th Thailand International Motor Expo at the Impact Challenger hall in Nonthaburi. Sopa Images | Lightrocket | Getty Images watch now While vehicles made in Thailand may not qualify for the Inflation Reduction Act subsidies, they are less likely to face steep tariffs that have been imposed on Chinese vehicles in the U.S., Goldstein said, and many market expects worry about tariffs which could increase even more if Donald Trump is reelected. A Trump reelection is not even necessary: the Biden administration may introduce 100% tariffs on Chinese EVs next week, according to reporting on Friday. There's also a very large market to sell into where U.S. tariffs won't matter at all: the 650 million people in Southeast Asia that can directly access one of ASEAN's largest automotive markets, according to Tu Le, founder of the Beijing-based consultancy Sino Auto Insights, who has worked from Detroit to China. A more affordable Tesla What's called the "China Plus One" supply chain strategy is gaining momentum across industries amid geopolitical uncertainty and the ongoing U.S.-China trade spat — even before the latest reports, President Biden has been in many respects as hawkish as Trump on China. However, the affordable mass-market vehicle that has so far eluded Tesla will be a key to achieving large sales volumes in the region. "A Model 3 or Y will still be too expensive for those markets to be high volume products for Tesla," Le said. Tesla said in its recent earnings that is it accelerating the launch of "new vehicles, including more affordable models" — with plans for a highly anticipated $25,000 model by 2025. But the company also made clear that much of that will take place on current manufacturing lines before investing in any new facilities. Notably, Tesla launched Model 3 and Model Y in Thailand in 2022, but has struggled against the onslaught of Chinese rivals like China's BYD and Xiaomi that offer a wide range of products, from high-end to affordable. In fact, BYD manufactured over three million EVs in 2023, exceeding Tesla's production for the second year in a row. Models presenting the Chinese automaker's electric car, the BYD Song MAX, at the 45th Bangkok International Motor Show 2024 in Nonthaburi Province, on the outskirts of Bangkok, Thailand, on March 30, 2024. Nurphoto | Nurphoto | Getty Images Recent reporting from Nikkei Asia indicated that Tesla's Model 3 sedan pricing has been cut 9% to 18% lower in Thailand, as its auto market joined the global slump and as BYD, Great Wall Motor, and other Chinese EV makers prepare to start their own production in the country. Chinese EV makers, including BYD, have earmarked $1.44 billion in new production facilities in Southeast Asia's second-largest economy. "The price war is not going to end very soon," Naruedom Mujjalinkool at Krungsri Securities, told Nikkei Asia. Tesla Thailand recently rolled out a special financing program to spur more sales. Thailand is a leading global automaker Steven Dyer, a former Ford executive and managing director at the Shanghai-based arm of consulting firm AlixPartners, said Thailand's existing auto infrastructure, labor force and policy all provide the potential for it to become a big player in EV manufacturing. But as important is automakers seeing enough of consumer market for locally made supply. In the auto industry, he said, a rule of thumb is "make where you sell," which reduces freight and customs duty costs, and mitigates the risks of currency exchange. Southeast Asia is a growing auto market, and Thailand is already the region's biggest car producer and exporter, with Toyota, Honda, Nissan, Ford, GM and Mercedes-Benz having already embraced Thailand as a regional headquarters. German President Frank-Walter Steinmeier (l) has an employee explain the production processes to him during a visit to the Mercedes-Benz plant near Bangkok. Mercedes-Benz produces 13 different car models in Thailand with over 1,000 employees. Picture Alliance | Picture Alliance | Getty Images