Toyota Motor is expanding its procurement of Chinese components in Thailand, which serves as its largest production hub in Southeast Asia, in an effort to reduce costs and improve the competitiveness of a new electrified model scheduled for release in 2028.

According to sources, the Japanese automaker has initiated large-scale procurement of components manufactured by Chinese companies operating in Thailand.

Toyota facilitated a partnership between Thailand's Summit Group, a major local supplier, and China's Wuhu Yuefei Sound-absorbing New Materials. The two companies established a joint venture in January and plan to build a manufacturing facility in Thailand to produce parts for Toyota, a source stated.

This is the first publicly known case of a major Japanese automaker facilitating the entry of a Chinese parts manufacturer into Southeast Asia.

Japanese automakers have historically held a dominant position in the Thai market, accounting for approximately 90% of new vehicle sales.

However, Chinese manufacturers such as BYD have increased their share by offering lower-priced electric vehicles and plug-in hybrids. From January to May, Japanese vehicles made up 71% of the market, while Chinese brands accounted for 16%.

This change has led Japanese manufacturers to re-evaluate their supply chains. Toyota's recent actions may represent a shift in strategic approach among Japanese automakers in the region.

Toyota is also advising its Japan-based suppliers to source products from Chinese companies, including Zhejiang Kaihua Moulds and plastics producer Kingfa Sci. & Tech., likely to reduce production costs.

Many of the suggested components are already used by Toyota in mainland China, including in the bZ3X electric vehicle, which has been on sale since March.

"They are attempting to maximise the use of components from Chinese manufacturers in Southeast Asia, similar to the approach taken with the bZ3X, in order to lower the cost of electrified vehicle production," said an executive from a Toyota-affiliated parts manufacturer.

Toyota is expected to launch a new model in Southeast Asia around 2028, built on a "multi-pathway platform" - a vehicle frame that supports different types of electrified powertrains, including hybrids. According to a source within Toyota, the company aims to reduce production costs by approximately 30% through the use of Chinese-sourced parts.

A Toyota representative declined to comment when contacted by media sources.

As Chinese automakers expand their operations in Thailand, Chinese parts suppliers have also increased their presence.

According to a market research firm, there are approximately 3,100 parts manufacturers in Thailand, around 1,400 of which are Japanese. Although only about 190 are Chinese, this figure has quadrupled since the end of 2017.

"Compared with Japanese companies, Chinese parts manufacturers offer cost advantages of between 20% and 30%," said the head of a local parts manufacturer, who also noted that some Japanese firms are "being forced to withdraw or downsize" in response to rising competition.