BANGKOK — Japanese car factories in Thailand — which for decades has been the premiere hub of auto manufacturing in Southeast Asia — are shutting down or scaling back.
Subaru said it will stop producing cars at its plant this month. Suzuki plans to cease operations by the end of 2025. And Honda and Nissan say they are reducing production.
The primary culprit: Chinese electric vehicles.
As the world embraces zero-emission vehicles, Thailand has been courting Chinese automakers, which in their quest for global dominance have spent more than $1.4 billion here as of last year to build EV factories.
“Japanese automakers are under significant pressure to cut costs to compete with Chinese brands,” said Larey Yoopensuk, chairman of the Federation of Thailand Automobile Workers. “They are now questioning whether staying in Thailand is still worthwhile.”
Thailand’s government — which wants 30% of the cars it produces to be electric by 2030 — sees Chinese investment as a crucial piece of the future of its auto industry, which now accounts for 800,000 jobs and 10% of the country’s GDP.
The paradigm shift has become a source of anxiety for Thai auto workers, who have long helped produce Japanese cars and the parts that go into them, including exhaust pipes, brakes and doors. Even if Chinese factories replace Japanese ones, Yoopensuk worried that there may not be a place for him or his colleagues in the new order.
One reason is that Chinese companies in Thailand have historically been intolerant of labor unions.
“Over the past decade, this industry has been booming, with unionized workers achieving better living conditions and high incomes,” said Yoopensuk, who has worked in auto manufacturing for 35 years. “If forced out, many workers — particularly older ones — may struggle to find jobs elsewhere.”
He was also concerned that Chinese EV manufacturers would use more automation and favor immigrants from China and Vietnam over Thai workers when hiring.
“This is an issue we’re pushing back against, encouraging these companies to also create employment opportunities here,” he said.
China’s foray into Thailand’s auto industry could herald what’s to come in other parts of the world, as EV adoption grows and Chinese brands go global. Last year, the Chinese behemoth BYD, which opened a factory in Thailand this summer, briefly surpassed Tesla in global sales.
“I don’t think there is any real precedent where those Chinese EV manufacturers are reshaping the industrial landscape in another country,” said David Williams, an expert on labor standards and supply chains in Asia for the International Labor Organization.
Thailand exports just over two-thirds of the cars it makes, with the biggest share going to Australia followed by Saudi Arabia, the Philippines and Vietnam.
Its most important market is domestic, and the news has been dismal. Total passenger car sales in Thailand fell 23% through September compared to the same period last year. Experts blamed rising household debt and increasingly stringent rules for securing auto loans.
Electric cars — nearly all of them Chinese — were the one bright spot, with sales up 11%.
Gasoline-powered cars still make up more than 90% of all sales in Thailand, but that is expected to fall as the government continues its push for EVs with subsidies for buyers and manufacturers.
BYD said its new plant would eventually generate about 10,000 jobs and produce 150,000 vehicles a year. When the company launched in Thailand, its distributor offered steep discounts on several models, bringing the cheapest models below $25,000.
That has intensified a price war that further threatens Japanese brands, which are fighting to keep up with cleaner cars of their own.
According to the Thai government, they have committed to investing more in local production of hybrids — which run on both battery motors and internal combustion engines — and electric pickup trucks. Honda started producing EVs in Thailand last December.
As gas-powered cars fall out of favor, some auto parts will be rendered obsolete, such as hydraulic-based steering systems and alternators.
The Thai Auto Parts Manufacturers Assn. has reportedly estimated that only about a dozen of the more than 600 auto parts makers in Thailand will be able to supply Chinese EVs.
Those that can transition to making parts for electric cars may still struggle to compete with Chinese rivals. Some auto parts suppliers have already shuttered as business has contracted.
Supat Ratanasirivilai, managing director of Thai Metal Aluminum, which produces aluminum-made parts for Japanese and American cars, said he has been negotiating with Chinese automakers since the start of the year.
But those talks have stalled since Chinese companies told him that his prices are 30-40% too high.
“We were hoping that when the Japanese carmakers’ production dropped, we may get some benefit from the Chinese carmakers,” he said. “But obviously they are not buying from the Thai suppliers.”
His company is pushing the Thai government to implement more protective measures for local workers, such as requiring EVs to be built with more locally sourced parts.
“The Thai government is really opening up everything for the Chinese carmakers. It has been very difficult for us,” he said. “I don’t know what’s to come next.”
Special correspondent Poypiti Amatatham in Bangkok contributed to this report.
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