BANGKOK— Japanese car factories in Thailand – which has been Southeast Asia's main auto production hub for decades – are closing or downsizing.
Subaru said it would stop producing cars at its factory this month. Suzuki plans to cease operations by the end of 2025. And Honda and Nissan say they are cutting production.
The main culprit: Chinese electric vehicles.
As the world embraces zero-emission vehicles, Thailand is courting Chinese automakers, which have spent more than $1.4 billion building electric vehicle factories here since last year in their quest for global dominance.
“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. “You are now wondering whether a stay in Thailand is still worth it.”
The Thai government – which wants 30% of cars produced to be electric by 2030 – sees Chinese investment as a crucial part of the future of its auto industry, which now accounts for 800,000 jobs and 10% of the country's GDP.
The paradigm shift is raising concerns among Thai auto workers, who have long helped produce Japanese cars and the parts they contain, including exhaust pipes, brakes and doors. Even if Japanese factories were replaced by Chinese factories, Yoopensuk worried that there might be no room for him or his colleagues in the new order.
One reason for this is that Chinese companies in Thailand have historically not tolerated unions.
“Over the last decade, this industry has boomed, and unionized workers have achieved better living conditions and high incomes,” said Yoopensuk, who has worked in auto manufacturing for 35 years. “If many workers – especially older ones – are forced to leave the company, they could have difficulty finding jobs elsewhere.”
He also feared that Chinese electric vehicle manufacturers would automate more and favor immigrants from China and Vietnam over Thai workers in hiring.
“We are fighting this problem and encouraging these companies to create employment opportunities here too,” he said.
China's foray into the Thai auto industry could be a harbinger of what's to come in other parts of the world as electric vehicle adoption increases and Chinese brands go global. Last year, Chinese giant BYD, which opened a factory in Thailand this summer, briefly surpassed Tesla in global sales.
“I don’t think there’s any real precedent for these Chinese electric vehicle manufacturers reshaping the industrial landscape in another country,” said David Williams, an Asia labor standards and supply chain expert at the International Labor Organization.
Thailand exports just over two-thirds of the cars it produces, with the largest share going to Australia, followed by Saudi Arabia, the Philippines and Vietnam.
The most important market is the domestic market, and the news is grim. Total passenger car sales in Thailand fell 23% through September compared to the same period last year. Experts blamed rising private household debt and increasingly strict rules for securing car loans.
The only bright spot was electric cars – almost all of them from China – with sales up 11%.
Gasoline-powered cars still account for more than 90% of all sales in Thailand, but that figure is expected to decline as the government continues its push for electric vehicles with subsidies for buyers and manufacturers.
BYD said the new plant will ultimately create about 10,000 jobs and produce 150,000 vehicles per year. When the company launched in Thailand, its distributor offered significant discounts on several models, so the cheapest models were under $25,000.
This has intensified the price war, further threatening Japanese brands struggling to keep up with cleaner cars.
The Thai government says it is committed to investing more in local production of hybrid vehicles – which run on both battery engines and internal combustion engines – and electric pickup trucks. Honda began producing electric vehicles in Thailand last December.
As gas-powered cars fall out of favor, some car parts will become obsolete, such as hydraulic 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 manufacturers in Thailand will be able to supply Chinese electric vehicles.
Those that can switch to making parts for electric cars may still struggle to compete with Chinese competition. Some auto parts suppliers have already closed as business has declined.
Supat Ratanasirivilai, chief executive of Thai Metal Aluminum, which makes aluminum 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 his prices were 30-40% too high.
“We were hoping that when Japanese automakers' production fell, we could benefit from Chinese automakers,” he said. “But obviously they don’t buy from the Thai suppliers.”
His company is pushing the Thai government to introduce more protections for local workers, such as requiring electric vehicles to be built with more locally sourced parts.
“The Thai government is really opening everything up to Chinese car manufacturers. It was very difficult for us,” he said. “I don’t know what’s next.”
Special correspondent Poypiti Amatatham in Bangkok contributed to this report.