Toyota made a Strategic Pivot in Thailand: EV Procurement Transformation and Chinese Supplier Adoption

(Updated October 2026)

Introduction

The automotive industry is changing its power sources, its competitors and its supply networks at the same time, and Toyota sits at the center of these shifts. Electrification is accelerating, Chinese EV makers are expanding rapidly, and procurement networks are being restructured. In Thailand, a major automotive production hub in Southeast Asia, market share has moved visibly from long-dominant Japanese brands toward Chinese EV makers.

We use the term “EV procurement transformation” for Toyota’s reported expansion of sourcing from Chinese suppliers for its electrified models in Thailand. In our view, this shift shows how automakers are using partnerships across the value chain to lower costs and gain access to suppliers with strengths in electrification. When we first published this report in August 2025, we expected these procurement and supply chain choices to shape outcomes through 2026 and beyond, with effects on tiered suppliers, logistics providers and IT partners. This October 2026 update brings the figures up to date and adds developments since publication. Our follow-up, “Thailand’s Automotive Market 2026: Japanese Share Falls Below 70%, a Chinese EV Maker Collapses — and What Became of Toyota’s China Sourcing,” tests the original view against 2026 data.

Industry-Wide Shifts: EV Transition and the Rise of Chinese Automakers

The global auto industry is electrifying fast. According to the International Energy Agency’s Global EV Outlook 2026, global sales of electric cars (battery-electric and plug-in hybrid) rose 20% in 2025 to more than 20 million, about a quarter of all new cars sold. In China, nearly 55% of new car sales were electric. China’s electric car exports doubled in 2025 to a record of more than 2.5 million, and electric cars rose from 20% of China’s car exports in 2024 to more than 35%. The IEA also reports that electric car sales in Southeast Asia more than doubled in 2025, with Chinese brands accounting for over half.

Chinese automakers are expanding globally on the strength of EV and battery technology and cost competitiveness. Western countries have responded with tariffs and other trade barriers, while Southeast Asia has remained comparatively open, giving Chinese firms a strategic entry point.

Geopolitical tensions and trade frictions are also pushing automakers to localize and diversify their supply chains. This shift affects not only automakers but also tiered suppliers and raw material providers, and it is driving restructuring across the automotive value chain.

Southeast Asia’s Changing Landscape: Japan’s Stronghold Under Siege

Thailand has long been a stronghold for Japanese automakers. Since the 1960s, Toyota, Honda, Nissan, Isuzu and others have built close supply chains with local parts makers. Nikkei reported in August 2025, citing a research firm’s count, that Thailand has about 3,100 auto parts makers, of which about 1,400 are Japanese-affiliated. On JETRO’s tallies, Japanese brands held shares in the high 80% range of Thai new-vehicle sales in 2019 to 2021.

The landscape has since shifted. According to JETRO (February 5, 2026), the Japanese share of new-vehicle sales fell from 76.7% in 2024 to 69.3% in 2025, while the sales share of five Chinese groups (BYD, SAIC-MG, Changan, Great Wall Motor and GAC) rose from 11.6% to 18.2%. On a JETRO tally of new registrations (September 4, 2026), Japanese brands accounted for 59% and Chinese brands for 33% of registrations in the first half of 2026. Sales and registration figures use different bases and cannot be compared directly. Led by BYD, Chinese brands including MG, Changan, Great Wall, GAC’s AION, NETA and Chery have entered the market with affordable EVs and plug-in hybrids. NETA’s parent has since entered court-supervised reorganization in China (June 2025).

Chinese firms are also producing locally. According to press reports, BYD started its plant in Rayong province in July 2024, and the plant reached cumulative output of 100,000 vehicles in September 2026. Changan’s Rayong plant began operating in May 2025. Chinese parts makers have followed: battery makers Gotion and SVOLT announced plants in Rayong and Chonburi, respectively (JETRO, December 2024).

Government policy has supported this. Under EV3.0 (2022 to 2023), Thailand offered import duty reductions and purchase subsidies for EVs, on condition that makers later build vehicles locally in proportion to the subsidized imports. Under EV3.5 (2024 to 2027), makers must build two vehicles locally for each one imported if they produce in 2026, or three if production slips into 2027. This spurred Chinese firms to build factories and positioned Thailand as an EV manufacturing hub. Not every maker has met its obligations: in September 2026, the Thai government announced that companies that missed their EV3.0 production obligations must repay the subsidies with 7.5% annual interest (JETRO, October 15, 2026).

Meanwhile, production of Japanese brands has been cut back. Tan Chong Subaru Automotive (Thailand), the assembler of Subaru vehicles, reportedly ended assembly by the end of 2024. Suzuki announced in June 2024 that it would end production at its Thai plant by end-2025 and did so; its Thai output had fallen to 7,579 units in fiscal 2023. Ford reportedly signed an agreement in January 2026 to acquire the former Suzuki plant next to its own. Honda announced in July 2024 that it would consolidate car production from Ayutthaya into Prachinburi, reducing capacity from 270,000 to about 120,000 units a year (per press reports). Nissan has merged vehicle assembly at its Plant 1 into Plant 2 (per press reports). In our view, slower sales and lost share in small-car segments have contributed to these moves.

Toyota’s Strategic Pivot: Embracing Chinese Parts in Thailand

Against this backdrop, Toyota has moved to open its Thai supply chain. According to Nikkei (August 2, 2025), Toyota planned to source parts in earnest from Chinese suppliers for its Thai operations, a major production base in Southeast Asia. As of October 2026, Toyota had made no official announcement on the plan. This EV procurement transformation marks a departure from Toyota’s traditional reliance on Japanese-affiliated suppliers.

Nikkei reported that Toyota introduced China’s Wuhu Yuefei, an interior-materials maker, to Thailand’s Summit Group, and that the two companies set up a joint venture in Thailand in January 2025 to build a local plant supplying Toyota with interior components. Nikkei described this as the first publicly known case of a major Japanese automaker supporting the entry of a Chinese parts maker into Southeast Asia. The story rests on sourced reporting: as of October 2026, none of the parties has made an official announcement, and the venture’s name, ownership split, plant location and start of production have not been disclosed.

Nikkei also reported that Toyota was encouraging its Japanese suppliers to adopt products from Chinese companies, including molds from Zhejiang Kaihua Mould and resins from Kingfa Sci. & Tech. In our view, the aim is to reduce procurement costs and to add competitive pressure within its supply base.

According to Nikkei, this strategy is linked to a new electrified model for Southeast Asia planned for around 2028. The model will use a multi-pathway platform for EVs, hybrids and other powertrains, and Toyota targets a 30% cost reduction by using Chinese parts. The report does not specify whether the 30% refers to total vehicle cost or to procurement cost. Nikkei tied this target to Toyota’s experience with the bZ3X, a low-priced battery-electric car sold in China. GAC Toyota launched the bZ3X in March 2025 at a starting price of CNY 109,800 (about JPY 2.2 million), using Chinese parts extensively.

Toyota’s push for Chinese parts is not only about its own costs; it is also a signal to Japanese suppliers to change. The August 2025 Nikkei report put the number of Chinese parts makers in Thailand at about 190, four times the end-2017 level, and quoted the head of a local parts maker as saying that Chinese parts are 20% to 30% cheaper than Japanese ones. Japanese suppliers unable to close that gap may face downsizing or exit.

Implications for Japanese Firms: Supply Chain, Keiretsu, and Competitive Pressure

Toyota’s EV procurement transformation has far-reaching implications for Japan’s auto industry. Other automakers face similar cost and electrification pressures, so Toyota’s move in Thailand may indicate where the industry is heading.

Impact on Supply Chains and Keiretsu Structures

Japan’s auto industry has long relied on keiretsu systems, characterized by stable long-term relationships, shared equity and joint quality control. The EV transition is disrupting this model. In a November 2022 report, Reuters noted that EVs require fewer parts and more software expertise, and cited Reiji Terasaka, a managing director at Carlyle Japan, as saying that automakers may no longer be able to support all their keiretsu suppliers and that keiretsu structures will change.

Collaboration with external firms, including Chinese suppliers, is likely to accelerate keiretsu restructuring. Japanese suppliers may face lower orders and weaker profitability, and those that cannot close a 20% to 30% price gap are likely to come under pressure to cut prices or lose business. In our view, lower-tier suppliers will feel the strongest effect; some may have to shrink, exit or move into other industries.

On the upside, having Chinese suppliers produce in Thailand reduces the risk of cross-border supply disruption, although dependence on Chinese technology and materials may increase, as noted in the risks below. Toyota’s strategy also reflects, in our view, a desire to localize supply chains. Japanese suppliers will need to adapt by offering competitive value to customers in and outside Japan.

Effects on Logistics and IT Partners

Supply chain changes also reach logistics and IT firms. Lithium-ion batteries are classified as dangerous goods in transport and are heavy, so EVs require dedicated packaging, transport and storage. Logistics providers need capabilities in battery handling, collection and recycling of used batteries, and regional distribution as local sourcing replaces exports from Japan.

IT firms face both opportunities and challenges. With CASE (Connected, Autonomous, Shared & Services, Electric), more of a vehicle’s value now depends on software and data. GAC Toyota, one of Toyota’s joint ventures in China, launched the bZ7 battery-electric sedan in March 2026 with Huawei’s HarmonyOS cockpit system (per press reports), and Toyota partnered with Google Cloud on in-vehicle voice AI in 2022. More partners from outside the keiretsu are likely to follow. Traditional IT partners that lag in software may lose relevance, while new tech entrants and foreign suppliers gain access to Japanese automakers.

Competitive Landscape and Brand Perception

The rise of Chinese EVs threatens Japanese automakers’ market share and profitability in Southeast Asia. In Thailand, Chinese makers accounted for 90.3% of battery-electric passenger car registrations in January to July 2026 (JETRO, August 18, 2026), and Japanese firms still lag in pure EV offerings.

Hybrid vehicles, however, are still growing. In Thailand, hybrid passenger car registrations rose 22.3% year on year to 101,756 in January to July 2026, and Japanese makers held 97.8% of them. Hybrids offer fuel efficiency without new infrastructure and retain their resale value well, and Japanese brands still benefit from a reputation for reliability and after-sales service.

Over the long term, the global push for carbon neutrality will keep moving the market toward EVs, and Japanese firms must catch up in EV development to remain competitive. Chinese brands are improving quality and service, and competition is moving from price alone to overall value, including service and user experience.

Pros and Cons of Using Chinese Suppliers

Toyota’s strategy may seem radical, but other firms are likely to face similar decisions. The key advantages and risks are summarized below.

Advantages of Chinese suppliers	Risks of Chinese suppliers
Cost efficiency: Chinese parts are reported to be 20% to 30% cheaper, enabling significant cost reductions. Toyota reportedly targets a 30% cut for its new electrified model planned for around 2028	Impact on Japanese suppliers: lower orders and profitability may lead to exits or bankruptcies and weaken Japan’s industrial base over time
Access to EV technologies: Chinese firms are strong in batteries and motors and offer scale and speed in development	Supply dependence and geopolitical risk: overreliance on China could expose firms to political tensions and export restrictions
Adaptability to emerging markets: Chinese firms have experience in low-cost competition and can help tailor products to local needs	Quality and brand concerns: quality has improved, but products may still face skepticism in some markets, and a major defect could damage brand trust

Strategic Recommendations for Japanese Companies

To maintain and enhance competitiveness, Japanese firms should consider the following.

1. Accelerate EV Strategy

Japanese automakers have been strong in hybrids but cautious in battery-electric vehicles, while EV sales in Southeast Asia keep growing. Firms need to shift R&D toward EVs and software, use government incentives and launch EVs suited to the region, with durability for heat, humidity and rough roads and with dense service networks. Even in Thailand’s support for hybrids, localization of electrification components is a condition, so localizing those components matters whatever the powertrain: hybrid excise rates (6% up to 100 g/km of CO2, 9% for 101 to 120 g/km) are frozen until 2032 for makers that invest at least THB 3 billion in 2024 to 2027, manufacture or assemble batteries locally from 2026 and source key components such as motors and inverters locally from 2028 (Thai government, December 2024; BOI).

2. Pursue Cost Competitiveness and Open Collaboration

The EV era favors agile, low-cost players. Japanese firms should open their sourcing and partnerships beyond the traditional keiretsu. Nissan’s N7 sedan, launched in China in April 2025, is a case in point: development was largely led by a Chinese team using local suppliers (per press reports). Nissan set up an export joint venture with Dongfeng in June 2025, and the first China-built N7s shipped to Southeast Asia in September 2026 (per press reports). Joint ventures and external capital, such as investments in start-ups or partnering a business unit with a foreign company, should also be considered.

3. Strengthen Supplier Competitiveness and Leverage Industrial Policy

Japanese suppliers must improve efficiency and move toward higher-value segments, for example from engine parts to motor and electronic control components. This may involve product portfolio reviews, M&A to acquire capabilities, and diversification. Investors took an interest early: Reuters reported in November 2022 that Carlyle sees investment opportunities in Japan’s auto parts industry. Deals involving Thai operations include Resonac’s transfer of its automotive molded-parts business in Japan and Thailand to Moriroku (completed April 2026) and Bridgestone’s sale of its steel cord businesses in Thailand and China to Belgium’s Bekaert (completed May 2026). Government support through subsidies, tax incentives and cross-industry matching will also help.

4. Tailor Market Strategies and Move Beyond Keiretsu-Based Thinking

EVs and hybrids will coexist in Southeast Asia for now, and adoption differs by country. Firms should deploy country-specific powertrain strategies, for example EVs for affluent urban buyers and hybrids or efficient combustion vehicles where charging infrastructure is limited. Toyota’s multi-pathway approach, which develops several powertrains in parallel, is a practical model for the transition. Over the long term, firms must be ready to shift to EVs, concentrate resources on their strengths, exit unprofitable segments, and look beyond their own keiretsu to external partnerships, including selling subsidiaries in declining areas.

5. Redefine Value Across the Value Chain

Japanese firms should move from selling products to providing services: software updates, charging services, battery warranties, trade-in programs and recycling. Suppliers, logistics firms and IT partners should also develop new services and cross-industry applications, such as precision manufacturing for medical devices or robotics, or battery collection and reuse networks.

Conclusion

Toyota’s EV procurement transformation in Thailand, built on the adoption of Chinese suppliers, marks a pivotal moment in the automotive industry’s transformation. Competition is extending beyond automakers to parts makers and service providers, and legacy models no longer suffice. Japanese firms still have deep technological expertise and brand trust. The challenge is to adapt quickly and collaborate openly.

The options include not only partnerships and joint ventures but also sales and transfers of businesses. In Thailand, Japanese automotive businesses are already changing hands to other Japanese and foreign companies. We support Japanese companies with operations in Thailand on such restructuring, and we approach overseas strategic and financial buyers as well as Japanese companies as counterparties.

[Update, October 2026] Since this article was first published, Japanese brands’ share of Thailand’s new-vehicle sales fell to 69.3% for full-year 2025, below 70%. The first reorganization plan for NETA’s parent was rejected in December 2025, and a new plan was presented in September 2026. In September 2026, the Thai government announced that companies that missed their EV production obligations must repay subsidies with interest. Our follow-up tests these developments against the latest data: “Thailand’s Automotive Market 2026: Japanese Share Falls Below 70%, a Chinese EV Maker Collapses — and What Became of Toyota’s China Sourcing.”

About Syntax Partners

Syntax Partners is a Japan-based M&A advisory firm providing advice and execution support on cross-border M&A, capital alliances and restructuring across Asia, with a focus on Southeast Asia. In M&A, we act exclusively as a financial advisor and support only one side, the seller or the buyer, in any given transaction. On sell-side mandates, we act as an advisor dedicated to maximizing value for sellers and owners, approaching overseas strategic and financial buyers as well as Japanese companies. On buy-side mandates, we research and build target lists based on the client’s strategy, approach owners and parent companies directly, negotiate, and execute the transaction. Contact us to discuss your strategy, partner search or restructuring.

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Sources

Nikkei, “Toyota to source Chinese parts in Thailand: a turning point for Japanese supply chains” (August 2, 2025)
International Energy Agency, Global EV Outlook 2026
JETRO business briefs (2025 production and sales, February 5, 2026; passenger BEV and HEV registrations, August 18, 2026; EV subsidy repayment, October 15, 2026)
JETRO regional analysis reports (December 19, 2024; September 4, 2026)
Thailand Board of Investment (BOI), EV3.5 announcements and HEV/MHEV excise measures
Royal Thai Government, announcement on National EV Policy Committee decisions (December 4, 2024)
Reuters (November 21, 2022, on Carlyle and Japan’s auto parts industry)
Company announcements (Suzuki, Resonac, Bridgestone, Bekaert)
Press reports (GAC Toyota bZ3X and bZ7, BYD and Changan plants, Tan Chong Subaru, Ford’s acquisition of the former Suzuki plant, Honda and Nissan consolidation, Nissan N7, Hozon reorganization, 2024 to 2026)

Syntax Partners, Inc.