Is The "Price War" Also A "Passport" For The Thai Car Market?

Is the "price war" also a "passport" for the Thai car market?

Article source: Gasgoo

The "price war" has been "rolled" from domestic to overseas.

Gasgoo has noticed that Thailand, which is trying to become the "Detroit of Asia", is becoming a new "battlefield" for price competition among Chinese car companies.

Many people said that after hearing this news, they seemed to smell a hint of the low-price competition of Chinese motorcycle companies in the Vietnamese market earlier, which inevitably gave rise to the worry that Chinese car companies would "make the same mistakes again" when going overseas.

So, is price reduction and mutual promotion really a tried and true method? If Chinese car companies want to gain a foothold in overseas markets and become a high-quality global car company, in addition to cost-effectiveness, what other "magic keys" are there for winning?

Who will be affected by the price reduction?

The Thai market is of great significance to Chinese car companies.

To a large extent, the ASEAN automobile market, represented by Thailand, will be an important example of the globalization of Chinese vehicle products overseas. At the same time, Thailand has also become the first stop for many domestic car companies to enter overseas markets.

Both foreign car companies and foreign media are paying attention to the dynamics of Chinese car products in the Thai car market, in order to analyze "how" and "how far" Chinese car companies can go in overseas markets.

Recently, Japanese media reported that price competition is beginning to open in Thailand’s pure electric vehicle market.

It is reported that BYD has reduced the price of its new main models by 20%; Chongqing Changan Automobile will also launch an offensive with the ultra-small low-priced pure electric vehicle "LUMIN", which has a range of about 300 kilometers and a price of about 4.8 million baht, the lowest price in the Thai market.

From BYD

In addition, the pure electric vehicle brand of Hezhong New Energy Vehicle also announced that it will launch a small pure electric vehicle with a starting price of about 550,000 baht, which is about 30% cheaper than BYD's small pure electric vehicle "Dolphin".

It is worth noting that Gasgoo has observed that this is not the first time that Chinese car companies and Japanese car companies have had a "price confrontation" in Thailand.

Since 2023, most Japanese car companies in Thailand have begun to cut prices, which is the first time in decades.

At the end of last year, foreign media reported that in the face of price cuts of more than 100,000 baht for Chinese-led new energy vehicles, Japanese cars represented by Toyota have launched a wide variety of car purchase discounts.

For example, Toyota offers an installment payment discount of up to 8 years; Honda offers 52 million baht in a lottery for car purchases; Suzuki and Nissan offer two-year loan assistance and free gas cards respectively.

Hideo Kawasaka, CEO of Honda Thailand, once said frankly: "Competition with Chinese brands has affected the C and D-segment markets (Honda Civic and Accord)." It is reported that Honda has been conducting research on City, Civic, HR-V and Accord models since last year. "Significant promotion", buyers can choose 0% interest rate, or cash discount of 20,000-30,000 baht.

In addition to the passenger car market, China's new energy vehicles have also launched an attack on the Thai cruise taxi market, which is almost monopolized by Toyota. In 2023, Aian will cooperate with Petroleum Thailand (PTT) and Thailand's local taxi operating company EV ME. In response, Toyota will immediately reduce the price of the Toyota Corolla model specifically for taxi companies by 30%.

From TOYOTA

There is even news that a certain Japanese car company in Thailand complained to the Ministry of Industry of Thailand, believing that the price of Chinese electric cars was "too low" and was dumping on Thailand. Therefore, it called on Thailand to set a minimum price limit for electric cars to avoid infringement on Thai and Japanese cars. Fuel vehicles cause dimensionality reduction.

The Thai market is already a "big cake". Although Japanese cars have been here for a long time, most of them stay in the fuel vehicle market. What cannot be ignored is that for the new energy vehicle market, Chinese car companies in Thailand also face competition from Tesla.

But now, Tesla is also suffering from the price impact of Chinese car companies.

Nikkei Asia reported that Tesla's car market prices in Thailand fell by 9% to 18% as BYD, Great Wall Motors and other Chinese electric car manufacturers prepare to start production in the country. It is reported that Chinese electric car manufacturers including BYD have allocated US$1.44 billion for new production facilities in Southeast Asia's second-largest economy.

In other words, China’s price reduction measures for new energy vehicles have already created a butterfly effect in the Thai market. So, what confidence do Chinese car companies have behind this price cut?

CRRC started a "price war". Is it forced or proactive?

According to Gasgoo Observation, there are three main reasons why Chinese car companies can start a "price war" in the Thai market.

The first is the support of subsidy policies for new energy vehicles in the Thai market.

As early as 2022, Thailand signed a trade agreement with China that all but eliminated tariffs on Chinese electric vehicles. This tax can be as high as 80% on imported European fuel vehicles, while it is about 20% on Japanese vehicles.

It is reported that at that time, the price difference in Thailand between Great Wall Euler and Nissan Leaf electric vehicles, which were supposed to be of the same price, could be as high as RMB 50,000.

According to the new policy, from 2024 to 2027, the Thai government will provide consumers who purchase new energy vehicles with car purchase subsidies of up to 100,000 baht per vehicle. From 2024 to 2025, the import tariff of new energy vehicles with a price not exceeding 2 million baht (approximately RMB 394,640) will be reduced by 40%; imported new energy vehicles with a price not exceeding 7 million baht (approximately RMB 1,381,240) The automobile consumption tax will be reduced from 8% to 2%. Automakers that enjoy this preferential treatment must produce twice the number of new energy vehicles in Thailand in 2026 and three times the number of new energy vehicles in Thailand in 2027.

In addition, in terms of taxation, it stipulates that if pure electric vehicles are produced and the investment is not less than 5 billion baht, including 100% foreign ownership, permanent ownership title, exemption from corporate income tax for up to 8 years, etc., if the investment in research and development You can also get additional preferential benefits.

On the other hand, the Thai government also spent 2.923 billion baht as car purchase subsidies to encourage consumers to purchase and use electric vehicles. For example, electric vehicles that meet the conditions will be given a price subsidy of 70,000-150,000 baht (approximately RMB 13,300-28,600 yuan).

From FTI

Secondly, the supply chain advantages of China's automobile industry are helping OEMs to effectively control costs.

You must know that Japanese fuel vehicles have been deeply cultivated in Thailand for a long time, which has led to many local spare parts suppliers in Thailand being good at fuel vehicle spare parts. Except for parts with low technical requirements such as interior decoration and tires, local Thai manufacturers will not be able to supply core parts for Chinese electric vehicles in a short period of time.

In addition, Thailand also provides subsidies and support to domestic new energy auto parts suppliers, which has led to Chinese auto parts manufacturers also choosing to enter Thailand to serve Chinese auto companies.

It is reported that in terms of the electric vehicle battery industry chain, Thailand currently has 18 projects under construction, involving battery production, module production, module assembly, etc. The total investment amount in battery-related projects in Thailand has reached US$39 million. Thailand provides certain reductions and exemptions on raw material import taxes for module production, with the reduction range being up to 90%.

Gasgoo noted that on April 17, Thailand’s BOI (Board of Investment Promotion) announced that, encouraged by Thailand’s preferential measures, CATL, China New Aviation, Inpai Battery, Yiwei Lithium Energy, Guoxuan Hi-Tech, Sunwanda, Seven major battery giants including Honeycomb Energy have expressed their interest in investing in Thailand.

This year, at least two Chinese battery giants will land in Thailand, bringing in investment of more than 30 billion baht. In other words, the industrial chain of Chinese electric vehicles will be more complete.

Finally, Gasgoo also observed that compared with the domestic market, Chinese new energy vehicle manufacturers have gained higher profits per vehicle in Thailand.

The 2024 Economic Outlook Report released by NESDB pointed out that the number of new registrations of electric vehicles in Thailand in 2023 will be 76,538, an increase of 695.9% from 9,617 in 2022. Among them, BYD registered 30,467 vehicles; Nezha registered 12,777 vehicles; MG registered 12,462 vehicles; Tesla registered 8,206 vehicles; and Great Wall registered 6,746 vehicles.

From NETA

In other words, among the top five car companies with electric vehicle registrations in Thailand in 2023, four Chinese car companies are among them, and occupy the top three.

It is worth noting that from the perspective of production capacity, the 2024 Economic Outlook Report shows that all Thai electric vehicle production capacity comes from Chinese car companies, of which Nezha has the largest production capacity, reaching 200,000 units.

It is also the Thai market that is providing Nezha Auto with higher profits per vehicle.

Relevant industry data shows that based on the current pricing of new energy vehicles in China, the BYD Atto3 (domestic version is Yuan Plus) is priced at 1.0999 million baht (approximately RMB 225,300) in Thailand and 139,800 yuan (after subsidies) domestically. ), a premium of approximately 61%.

The Thai price of NETA V (Nezha V) is 760,000 baht (approximately RMB 155,600), and the domestic price is 73,900 yuan (before subsidies), a premium of approximately 110.6%.

In other words, Chinese new energy vehicles have greater profit margins in Thailand than in China. Compared with BYD Atto3, Nezha Automobile's complete vehicle products also have greater room for premium in the Thai market.

Based on this, we may be able to judge that China's price reduction measures for new energy vehicles in the Thai market are more proactive.

How to fight a price war? High pricing, then price reduction? Low price, then price increase?

However, does selling more and making more money mean that we can lower prices without any scruples?

This is not the case.

The undeniable fact is that at present, Chinese new energy vehicle companies have launched a "price war" in the Thai market. In addition to being competitive with Japanese fuel vehicles and Tesla electric vehicle products, they have also more or less "hurt the enemy". The phenomenon of losing one thousand to one's own and losing eight hundred".

The first is the damage caused to the service system by price reduction too quickly.

A Thai car dealer once told relevant media in the industry: "Frequent price cuts by Chinese car companies have had an impact on the local consumer market. On the one hand, it is not good for consumers who have already purchased vehicles, and on the other hand, it is not good for healthy competition in the local market."

"Car companies have cut prices too fast, putting dealers under pressure and struggling to make profits, let alone provide good services." The lack of after-sales service will consume consumers' reputation and brand recognition.

The second is "self-rolling".

After conducting on-site research in the Thai market, some media found that a salesperson at a Great Wall Thai store stated that orders from Euler were indeed diverted to BYD Dolphin and Deep Blue due to the shorter delivery cycles of other Chinese car companies. "Especially BYD! They always promise to deliver the car within a week." The interviewee said.

In addition, Thai headline news media reported that the Thai market pays great attention to domestic developments in China. Whether it is the incident of Great Wall Motor reporting BYD in 2023, or the recent launch of Xiaomi Motors, as well as the remarks of leaders of many car companies, they are all in Thailand. Generate attention.

From Great Wall Motors

In other words, infighting will already damage the overall reputation of Chinese cars in overseas markets.

Thirdly, price reduction promotions are eager for quick results and it is easy to ignore long-termism.

You must know that as a typical case of successful automobile overseas sales, the advantages of Japanese car companies are system capabilities and service capabilities.

Japanese cars going overseas focus on the collaboration between car companies, car companies and parts companies, as well as the close integration of car business with financial services, equity investment, law, cultural training, public relations media, and information intelligence.

It is reported that most of Thailand’s automobile industry consulting companies have Japanese backgrounds. They charge consulting fees from Japanese automobile companies, collect information and formulate strategies for Japanese automobile companies in Thailand, and can even influence the policy formulation of the Thai government.

Finally, the old car owner was stabbed.

We have to admit that price reduction is the most direct way to sell complete vehicle products, but it is also one of the means that hurts old car owners the most. After all, price cuts will directly affect brand value retention. Tesla, which frequently cuts prices, has one of the most typical cases of declining value retention rate.

In this regard, some dealers told the media that Chinese car companies should learn from Toyota's pricing method: lower the price when pricing the complete vehicle, and then increase the price back bit by bit as the market stabilizes. Banks and other financial institutions will also have a negative impact on the brand. The value recognition is getting higher and higher, this is the right way.

In short, car sales are by no means a "one-time deal". Remember not to consume car brands into "pop-up stores".