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South East Asia

Chinese state-owned car manufacturer Changan Automobile is reportedly planning to build a plant in Thailand, joining other automotive giants such as BYD and Great Wall Motors in mounting forays into South East Asia.

Establishing manufacturing bases in this region will provide Chinese car makers with significant opportunities to explore new markets and leverage its booming automotive industry. And by having factories in Thailand, companies would able to avoid high import tariffs and would significantly reduce transportation costs.

More and more Chinese car makers are looking to enter what is a competitive market. However, the region’s growing demand for electric and also hybrid electric vehicles, coupled with China’s expertise in these fields, presents an opportunity for them to establish strong presences.

Known as the “Detroit of Asia”, Thailand has made significant efforts to attract foreign car manufacturers, including incentives like tax breaks and a strong local supply chain. Such favourable conditions make it a preferred choice for vehicle companies looking to establish a base in South East Asia.

Meanwhile, there has also been a noticeable shift over recent years in the investment patterns of Japanese manufacturing companies as they increasingly look towards South East Asia as a viable alternative to China. This is particularly evident in the movement of manufacturing equipment and facilities from China to countries such as Thailand owing to its perceived political stability, its relatively low labour costs and its well-established infrastructure. The ease of recruiting and retaining skilled talent in Thailand has also been a key consideration for Japanese businesses.

Other South East Asian nations, including Vietnam, have also emerged as attractive investment destinations for Japanese manufacturing companies owing to the abundance of skilled labour and a growing consumer market in these countries.

This shift in Japanese manufacturers’ investment patterns towards South East Asia is a clear indicator of the region’s increasing attractiveness as an alternative to China. While there are challenges and disadvantages associated with this shift, the risks for many companies are outweighed by the above-mentioned advantages of lower production costs, proximity to growing consumer markets and political stability. As South East Asia continues to develop and improve its infrastructure and regulatory frameworks, this trend is likely to gain momentum in the coming years.