28 Asian Legal Business | September 2024 Going electric Thailand has established itself as the most dynamic automotive market in Southeast Asia. In response to cost and regulatory factors, manufacturers and automakers from China are realigning their supply chains, resulting in increased competition within the Thai market. Dubbed the “Detroit of Southeast Asia,” Thailand has gained a reputation as one of Southeast Asia’s fastest-growing markets for electric vehicles, especially as countries relocate supply chains for cost and regulatory considerations. Historically, Thailand has been home to the manufacturing facilities of heavyweight auto brands, making it the largest vehicle manufacturing base in Southeast Asia. In particular, Japanese automakers such as Toyota Motor, Honda Motor and Isuzu Motor have long had a significant footprint in Thailand, the region’s auto export hub. “These facilities are closely supported by different tiers of parts manufacturers and businesses connected with vehicle manufacture, including logistics and distribution, manpower and recruitment, and commodity sourcing,” notes Pranat Laohapairoj, partner at Thai law firm Chandler MHM. Thailand’s already dominant auto assembly prowess has been bolstered even further by the ascendency of electric vehicles (EVs) as Southeast Asia pivots to sustainability and decarbonisation. In July, Thailand attracted Chinese EV champion BYD to set up its first Southeast Asia factory in ASEAN’s second-largest economy. The $490 million factory has just rolled out its first locally assembled model – BYD Dolphin - to the domestic Thai market, sweetening the launch even more with sizable discounts. Pranat points out that the influx of Chinese EV manufacturing facilities coincides with a significant increase in sales of both imported and domestically manufactured EVs in Thailand, which is now the largest overseas market for Shenzhen-based BYD. As a result, the rising dominance of Chinese EV makers in Thailand has encroached upon the market share of Japanese carmakers in the niche eco-car segment. The growing appetite of Thai consumers towards EVs against internal combustion engine (ICE) cars has also been translated to lagging sales of non-eco-friendly auto models. In June, Suzuki Motor announced it will close its factory in Thailand by the end of 2025, a decision prompted by consistently sluggish sales and intensifying competition in the country despite painful price cuts. The Japanese carmakers will continue to sell electric and hybrid cars in Thailand but will steer its production focus in Asia to Indonesia, Japan and India, markets believed to be more promising. Suzuki’s announcement came at the heels of Subaru’s own decision to shut down a plant in Thailand due to a “proactive business transformation.” In May, Tan Chong Subaru Automotive (Thailand), Subaru’s first dedicated assembly plant in Southeast Asia, said that it would halt the manufacturing of vehicles in Thailand by the end of this year after five consecutive years of losses. “This rapid increase in EV sales, predominantly from Chinese brands or exports from China, has naturally resulted in a concerning decrease in sales for traditional competitors - namely, Japanese brands”, adds Pranat. Electric momentum Lawyers note that the seismic shift from ICE or hybrid vehicles to EVs, especially the Chinese brands, could bring significant impact on Thailand’s legal industry. Firstly, divestment from existing joint ventures of automakers will present additional opportunities for regulatory, labour, and dealmaking work, keeping lawyers busy. However, the scale-down in capacity of ICE and hybrid car manufacturers and their parts manufacturers, which has traditionally formed a significant part of the work for law firms in Thailand, now might be thinning those firms’ timesheets. “The reduced presence or decreased production capacity may mean fewer opportunities for future commercial projects and conflict resolution, as well as natural tightening of the budgeting process, which can have a direct impact on law firms.” On the other side of the coin, fresh demand is also arising for legal services from “emerging By Sarah Wong Thailand
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