As Chinese electric vehicle (EV) manufacturers are trying to get market share from the Europe’s traditional brands, in a similar fashion in Thailand they try to outdo their Japanese rivals, which have a strong foothold in the Southeast Asian nation. In September, China’s biggest EV maker BYD Co announced plans to build its first overseas electric passenger car plant in the country. Around the same time, Great Wall Motor (GWM), another Chinese EV maker, rolled out 10,000th car from its Thailand factory.

Chinese automakers also export a record number of EVs to Thailand. This year from January to September, almost 60,000 units were exported to Thailand, a 176% jump from the previous year. Thailand now ranks third as an export destination for Chinese EVs, behind Belgium and the UK.

An important reason for the focus on Thailand is its history as Southeast Asia’s top auto manufacturing hub and No. 10 in the world. Its comprehensive supply chain feeds scores of factories, mainly owned by Japanese companies, producing internal combustion engine cars.

In February, Thailand became the first country in the region to offer cash subsidies, up to 150,000 baht ($4,000), for passenger EVs. The government is considering battery subsidies to further reduce the cost, a move that would add to the some 43 billion baht of tax cuts and incentives for EVs so far.

In addition, Chinese automakers are exempt from most import and excise duties until the end of 2023, though in return, they have to commit to producing locally beginning in 2024. Thailand has said it wants 30% of its total car output to be electric by 2030.

As a result, foreign direct investment from China in the first nine months of 2022 has doubled from a year ago. Much of that investment has flowed into Thailand’s EV sector.

Chinese government’s net-zero commitment and push for self reliance in technology together with preferential policies have boosted the production and purchase of non-fossil fuel cars and China’s EV market is now the world’s largest.

GWM’s Ora has become the No. 1-selling EV model in Thailand this year. With a price tag of 763,000 baht, it’s cheaper than Japanese EV options. The market share of Chinese EVs in Thailand is expected to rise from 58% last year to around 80% this year.

Though Thailand’s EV market is still nascent, demand in the region more broadly is expected to surge. Home to some 675 million people, passenger EV sales in Southeast Asia are forecast to jump from just 31,000 this year to 2.7 million in 2040.

Japanese automakers like Toyota has been left behind in the EV race. Toyota, which commands about one-third of Thailand’s auto market, only plans to launch its first battery EV model in the country later this year.

Still, Chinese automakers have a long way to go. The top five Japanese auto manufacturers have 80% market share in Thailand.