Reshaping global value chains
The energy transition can redistribute industrial competitiveness and economic influence worldwide
The energy transition is doing more than replacing fossil-fuel technologies with cleaner alternatives. It is changing the foundations of industrial competitiveness, reorganizing international production and trade, and redistributing economic influence among companies and countries.
Thailand's electric vehicle market provides a vivid illustration of this wider transformation. For decades, Thailand was one of the strongest overseas bases of the Japanese automotive industry. Its position as the "Detroit of Asia" rested on extensive production networks, skilled suppliers and world-class capabilities in internal-combustion engines, transmissions and mechanical engineering.
That industrial order is now being tested by electrification. The market shift has been rapid.
Electrified vehicles, including hybrids, plug-in hybrids and battery-EVs, accounted for only about 3 percent of new vehicle registrations in Thailand in 2020. By 2025, their combined share had soared to more than 44 percent, comprising 21.8 percent for hybrids, 19.6 percent for battery-EVs and 2.9 percent for plug-in hybrids, according to data from Thailand's Board of Investment. In five years, electrification has moved from a marginal segment to almost half of Thailand's new-vehicle market.
This transformation is most clearly reflected in the shifting competitive balance between Japanese and Chinese automakers in Thailand, as the basis of automotive advantage moves from conventional engineering toward batteries, electronics and software. Based on brand-level sales data compiled by MarkLines, Japanese brands' share of Thailand's overall vehicle market fell from 88 percent in 2020 to 69.3 percent in 2025, while Chinese automakers' share rose from about 3.2 percent to 21.2 percent over the same period, and Chinese-owned brands accounted for 90.5 percent of battery-EV sales. Japanese manufacturers nevertheless remain the largest force in Thailand's overall automotive market and production base.
These figures are important, but the deeper story is that EVs change the technological architecture of the automobile and therefore the rules of competition.
The competitiveness of conventional vehicles was built around engines, transmissions, fuel systems, mechanical reliability and highly coordinated component supply chains. EVs depend on a different combination of capabilities: batteries, electric motors, power electronics, semiconductors, software, digital interfaces, charging systems and energy management. Mechanical complexity declines, while electrochemistry, electronics and software become more important.
This technological paradigm shift changes the relative value of accumulated assets. An advanced engine plant or a supplier specialized in combustion components may become less strategic, while battery technology, software architecture or power electronics become more valuable. New entrants can compete without first surpassing incumbents in every conventional automotive capability.
The consequences extend beyond technology itself. As the basis of competitiveness changes, so do trade flows, investment patterns and the location of production. In 2024, Thailand imported passenger vehicles worth about $1.58 billion from China, followed by Japan, $342 million, making China its largest foreign source of imported cars by value, according to data from the World Bank's World Integrated Trade Solution. Japanese manufacturers still produce extensively within Thailand, so import data do not capture the full balance of industrial activity. Even so, the pattern shows how electrification is redirecting cross-border trade.
The shift in trade is being accompanied by investment. Chinese producers are moving from exporting EVs to building regional production networks. BYD opened a $490 million Thai plant with annual capacity of 150,000 vehicles and battery assembly, within a wider wave of more than $3 billion in Chinese EV investment, according to Thailand's Board of Investment. Along with other projects, this is turning Thailand into a platform for both domestic sales and exports to the Association of Southeast Asian Nations.
Thailand's policy response reflects this reorganization of international supply chains. Its objective is to turn import-led demand into local production, component supply and export capacity. By October 2025, cumulative approved investment in the Thai EV supply chain had reached 140 billion baht ($4.18 billion), spanning vehicle assembly, batteries, components and charging infrastructure.
The emerging structure is complex: Japanese incumbents, Chinese EV producers, Thai suppliers and regional markets are becoming part of a more diversified production network. Competition is increasingly centered on where batteries, electronics, software, research and other high-value functions are located, how trade and investment flows adjust, and how much of the resulting value host economies can retain. Japanese incumbents, too, are adapting.
Thailand is not an isolated case. In 2025, global electric-car sales exceeded 20 million and accounted for one-quarter of new cars sold. As manufacturers expand abroad, competition is moving beyond exports toward overseas factories, regional supply chains, local partnerships and control of strategic components.
The same mechanism is visible across the energy transition. Solar manufacturing is restructuring power-sector supply chains, while battery storage is changing how electricity systems balance supply and demand. Grids, power electronics and digital energy systems are becoming strategic assets as countries seek to integrate larger shares of variable renewable electricity. Low-emission hydrogen and related production processes may also influence the future location of steel, fertilizer, chemicals and shipping activities.
In the fossil-fuel economy, industrial advantage was often associated with access to oil and gas, refining capacity, combustion technologies and established heavy industry. In an increasingly electrified economy, competitiveness will depend more on affordable clean electricity, batteries, critical-mineral processing, power electronics, digital technologies, advanced manufacturing and the ability to integrate these elements into complete industrial ecosystems. The importance of these capabilities is already evident in the high geographical concentration of clean-energy-technology manufacturing and mineral processing.
This transition could redistribute global economic influence. Countries that control technology, intellectual property, finance and integrated supply chains are likely to capture a larger share of the value. Countries that mainly import clean technologies may reduce emissions while developing new industrial dependencies. Mineral-producing countries may attract investment but still capture limited value if extraction is not linked to processing, manufacturing and technological capability. A release by the United Nations Conference on Trade and Development in June noted that mineral-rich developing countries can develop industrial capacity, strengthen local processing and value addition, and move up the value chain.
China's experience illustrates how the energy transition is reshaping the foundations of industrial competitiveness. Over the past decade, China has built an integrated clean-energy industrial ecosystem spanning renewable power, batteries, electric vehicles, critical minerals processing and advanced manufacturing. This ecosystem has strengthened Chinese companies' competitiveness at home and abroad, while also accelerating the global diffusion of clean technologies.
The future of industrial competition will not be determined solely by traditional manufacturing advantages, but by the ability to build complete ecosystems that connect technology, supply chains, infrastructure and markets. As the energy transition unfolds, countries that can develop such integrated capabilities will be better positioned to shape the next stage of global economic development.
Shi Xunpeng is a professor at the University of Technology Sydney. Nophea Sasaki is a professor at the Sasin School of Management, Thailand. Both are fellows at the Institute for Energy Transition & Sustainability, an Australia-based virtual think tank.
The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
Contact the editor at editor@chinawatch.cn.
