Tesla Explores Expansion in Thailand Amid Sales Slump and Competition from Chinese EV Makers

Tesla, facing a significant sales slump and increasing competition in the EV market, is exploring opportunities outside of China, where it operates a major manufacturing and consumer base. The company is considering Thailand as a potential location for its next gigafactory, as the Southeast Asian country offers tax breaks and subsidies to promote EV adoption. This move comes at a crucial time for new demand, with the U.S. administration limiting China’s ability to flood the U.S. Market with renewable energy products, including its rapidly growing supply of EVs, with models priced as low as $10,000. 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. The affordability mass-market vehicle that has so far eluded Tesla will be key to achieving large sales volumes in the region. However, Chinese EV makers, including BYD and Xiaomi, offer a wide range of products, from high-end to affordable, making it challenging for Tesla in Thailand. The company launched Model 3 and Model Y in Thailand in 2022 but has struggled against the onslaught of Chinese rivals. Recent reporting 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. The price war is not going to end very soon, according to Naruedom Mujjalinkool at Krungsri Securities. 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. The country is also striving to become a leading global manufacturing powerhouse through favorable tax benefits and import duties, but it still has to play its cards right to convert current auto production to be EV-ready. By 2030, Thailand aims to convert 30% of its annual production of vehicles to be EVs, which equates to 725,000 cars and 675,000 motorcycles. Leading legacy automakers, including Honda and Toyota, have committed a $4.1 billion to produce EVs in Thailand. However, Chinese EV makers already make up 60% of worldwide sales, according to the International Energy Agency. Without an affordable entry-level model, U.S. EV makers like Tesla may be hamstrung against Chinese rivals ramping up production and rolling out models across a much wider price range. An affordable Tesla model could help turn the tide amidst a sales decline and fierce Chinese competition, but as with all things Tesla, promises and timelines lead the experts to remain cautious, if not outright skeptical. The U.S. Government rules are buying U.S. Companies “time to design, develop, and manufacture more competitive EVs at reasonable prices,” Le said. Yet, without a cheaper entry-level model, U.S. EV makers like Tesla may be hamstrung against Chinese rivals ramping up production and rolling out models across a much wider price range. Tesla’s anticipated $25,000 entry-level vehicle, dubbed the Model 2, could help turn the tide amidst a sales decline and fierce Chinese competition, but as with all things Tesla, promises and timelines lead the experts to remain cautious, if not outright skeptical.