BriefCASE: EV manufacturing in Thailand gets booster shots from Chinese automakers

Thailand is not just attracting honeymooners from across the globe. Through its policies, the Thai government is attracting billions of dollars in foreign investments to propel the country into a regional hub for the electric vehicle (EV) manufacturing. The policies seem to be working as there have been many announcements over the past one year by original equipment manufacturers, especially from mainland China, and battery suppliers for setting up of new plants in Thailand.

In March, Neta Auto commenced mass production of EVs at its first Thai factory, which has an annual production capacity of 20,000 vehicles. In February, GAC Aion started construction of an EV factory in Thailand that will have capacity for producing 50,000 units per year. The plant will be built in two phases; the first phase is scheduled for completion in July 2024. In January, Great Wall Motor started mass production of GWM Ora 03 in Thailand. This marked the first time the Chinese OEM mass-produced an EV outside of China. Additionally, Changan Automobile is building an EV factory in the country that is expected to begin operations in 2025 with an initial capacity of 100,000 units per year. Automakers such as BYD and SAIC are also ramping up production capacity for EVs in Thailand.

Besides having the potential for becoming an EV production and export hub in the future, the rising sales of Chinese vehicle brands in Thailand seems to be a major factor behind the investments. According to a report by Thailand Business News, models from mainland Chinese automakers accounted for nearly 80% of the EV market in 2023.

Updated policy expected to push EV demand

Thailand aims to convert 30% of its annual automotive production into EVs by 2030. In this regard, earlier this year The National Electric Vehicle Policy Board (EV board) approved the second phase of EV Package, known as EV 3.5, for four years (2024-2027), which replaced the EV 3 program started in 2022. As part of the EV 3.5 package, the government will provide subsidies for the purchase of electric cars, electric pickup trucks and electric motorcycles based on the vehicle types and battery capacities.

A key point to notice in the EV 3.5 package is the absence of any subsidies for hybrids, including plug-in hybrids (PHEV). This highlights the government's attention for promoting adoption of purely battery-powered vehicles. However, the excise department has proposed a slightly lower rate for hybrids and PHEVs starting 2026, depending on the CO2 emissions for hybrids and electric range on a single charge for PHEVs. The rates are expected to increase yearly by two percentage points every two years for HEVs.

To be eligible for the incentives, the company's domestic EV production must offset any CBU imports at a ratio of 1:2 by 2026 (two BEVs must be produced in Thailand against one imported CBU) and 1:3 by 2027.

Production of EV batteries to grow

The new policy is pushing EV manufacturers in Thailand to deploy a highly localized and in-house production strategy for EV parts, including EV batteries. Recently BMW commenced construction of a facility in Rayong to produce Gen-5 high-voltage batteries. This plant, which will convert imported battery cells into modules, will help BMW increase the localization for BEVs that it plans to produce in the country starting mid-2025. Last year, Svolt announced that it has commenced construction at its EV battery module and pack assembly plant in Thailand. According to Great Wall Motor, Svolt will be the primary battery supplier for the Thai-built GWM Ora 03.

According to S&P Global Mobility analysts, the demand for battery cell from light vehicles manufactured in Thailand is expected to increase nearly 10-fold in 2024 compared with 2023. S&P Global Mobility expects a growing shift in Thailand from PHEVs to BEVs, which are equipped with much bigger batteries.

To boost EV cell manufacturing in the country, the Thailand EV board has approved cash grants for cell manufacturers. To be eligible for the grants, the cells manufactured should have a high energy density of not less than 150 Wh/kg. Batteries must also have a life cycle of not less than 1,000 cycles, counting from 70% of the nominal capacity at a depth of discharge of not less than 80% at a test temperature of 20-25 degrees Celsius. Providing detailed testing conditions like this helps battery manufacturing companies develop clear strategies.

In particular, the condition of 150Wh/kg energy density is expected to satisfy not only the latest lithium iron phosphate, or LFP, batteries (such as BYD's second generation blade cell with 180Wh/kg), but also sodium-ion batteries (such as CATL's 160Wh/kg sodium-ion battery). This will provide opportunities to manufacture cost-competitive LFP and sodium-ion batteries, not just high nickel lithium ion batteries.

Author: Srikant Jayanthan, Senior Research Analyst, Supply Chain & Technology, S&P Global Mobility

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.