Thailand's Automotive Sector in Crisis: Can EVs Steer a Recovery?

Thailand’s automotive industry, long a cornerstone of its export-driven economy, faces unprecedented challenges. In March 2025, vehicle production fell 6.1% year-on-year, while exports slumped amid a toxic mix of domestic financial strains, geopolitical risks, and aggressive competition from Chinese electric vehicle (EV) manufacturers. For investors, the question is clear: Can Thailand’s automotive sector pivot to EVs fast enough to offset these headwinds, or is it heading toward a prolonged decline?

The Domestic Demand Drought

Thailand’s struggles begin at home. Household debt, now at 89% of GDP, has forced banks to tighten lending criteria for auto purchases—particularly for pickup trucks, a mainstay of Thailand’s automotive market. Domestic car sales dropped 6.68% in early 2025, with Isuzu’s sales plummeting 48.3% in early 2024. These declines reflect a broader economic slowdown, as consumers and businesses retreat from high-cost purchases.

The Chinese EV Tsunami

The real disruption comes from China. EV brands like BYD, MG, and NETA have flooded Thailand’s market, pricing aggressively to undercut Japanese rivals. BYD alone commands 32% of Thailand’s EV market, selling its Atto 3 for just 1.099 million baht—a third cheaper than Tesla’s Model Y. This has sent sales of traditional brands like Toyota and Honda reeling, with combined declines of 17.4–48.3% in early 2024.

BYD’s rise reflects its dominance in Thailand and globally, squeezing legacy automakers.

Geopolitical Risks and Trade Barriers

External threats loom large. U.S. "transshipment" rules could impose 36% tariffs on Thai exports of Chinese-made goods, destabilizing a sector reliant on global supply chains. Meanwhile, Middle East conflicts have slashed exports to that region by 21.1% year-on-year, hitting a 33-month low in January 2025.

Semiconductors: A Lingering Bottleneck

Even as semiconductor shortages ease, supply chain fragility persists. Advanced chips for hybrids and EVs remain scarce, delaying production. Compounding this, U.S. firms like Western Digital are "friend-shoring" semiconductor manufacturing to Thailand to avoid Chinese tariffs, straining local capacity and raising costs.

Exports: Nuanced Growth Amid Volatility

While vehicle exports (CBU) fell 28.13% in January 2025, automotive parts exports surged 14.2% in March 2025, driven by demand from regional automakers like Toyota. This dichotomy highlights Thailand’s dual role: a declining producer of finished vehicles but a growing supplier of parts. However, geopolitical risks and high base effects threaten this momentum.

Toyota’s performance underscores Thailand’s importance, but its reliance on stable trade ties is a vulnerability.

Government Measures: A Band-Aid on a Bullet Wound?

Thailand’s responses—pickup loan guarantees, reduced EV subsidies, and the Eastern Economic Corridor (EEC)—are insufficient. The EEC’s BYD plant, promising 150,000 EVs/year, faces delays, while subsidies can’t match Chinese pricing. The Federation of Thai Industries (FTI) now forecasts 1.7 million vehicles produced in 2025, down sharply from its original 1.9 million target.

Outlook: EVs Offer Hope, but Risks Remain

EVs account for 15.4% of Thailand’s 2024 sales, and the government aims for 30% EV production by 2030. However, BYD’s dominance and U.S.-China trade tensions threaten Thailand’s competitiveness. The Commerce Ministry’s $26.7 billion March export surge—driven partly by automotive parts—suggests short-term resilience, but SCB’s 1.6% annual export growth forecast warns of lingering risks.

Conclusion: Caution and Strategic Bets

Thailand’s automotive sector is at a crossroads. While EVs and parts exports offer hope, high household debt, U.S. trade threats, and Chinese competition pose existential risks. Investors should focus on:
1. EV adoption trends: Monitor BYD’s market share and Thailand’s EV production targets.
2. Geopolitical developments: Track U.S. tariff policies and Middle East stability.
3. Supply chain resilience: Evaluate how firms like Toyota and Honda adapt to semiconductor shortages.

Thailand’s March 2025 data shows a 6.1% production decline, but automotive parts exports grew 14.2%—a sign of structural strengths. Yet, without resolving debt and trade issues, even EVs may not be enough to steer a full recovery. For now, the sector remains a high-risk, high-reward bet.

Data sources: Thai Ministry of Commerce, Federation of Thai Industries, SCB Economic Intelligence Center.