Illustration: Chen Xia/GT

Southeast Asia may be in for a foreign investment boom, especially in the electric vehicle (EV) sector. South Korean automaker Hyundai Motor said it will invest 1 billion baht ($28 million) to set up a facility to assemble EVs and batteries in Thailand, Reuters reported on Wednesday.

The news came after media reports saying that China's BYD opened an EV plant in Thailand in July. The plant is part of a wave of investment worth more than $1.44 billion from Chinese EV makers that are setting up factories in Thailand, according to Reuters.

The world is experiencing a fundamental change in transportation as global consumers increasingly favor EVs over internal combustion vehicles. Amid growing EV consumption, Southeast Asia's attractiveness for foreign investment is growing. This is obviously good news for the Southeast Asian economy. The investment boom could be attributed to several factors. 

First, there are relatively low tariff and non-tariff barriers to entry to the Southeast Asian EV markets. As a result, some foreign-invested automakers have good sales in the local markets and are very interested in carrying out localized production in Southeast Asian countries.

Second, Southeast Asia as a region is part of many free trade agreements (FTAs) with major economies, including China. Due to the benefits that come with FTAs, Southeast Asia has attracted foreign investment for factories making EV components and parts. Such investment has helped Southeast Asia take a step up in the regional EV supply chain.

Third, Southeast Asian economies have rolled out policies to attract investment in the EV and battery industries. Their EV-friendly policies have lured global investors to the region.

Southeast Asia's success story in recent years has proven that bringing down tariff and non-tariff barriers, promoting fair competition and fostering a fair market environment are necessary to thrive. Total EV sales in Southeast Asia experienced year-on-year growth of 894 percent in the second quarter of 2023, the highest rate globally, according to media reports.

Hyundai's investment may intensify competition in Southeast Asia's EV market. But as long as the competition is fair and square, there is no reason to refuse, fear or avoid it. Fierce competition is conducive to promoting the development of the EV industry in Southeast Asia.

Southeast Asia's EV market is open not only to Chinese companies, but also to companies from other countries, including Western economies, and through fair competition, those companies together play an important and positive role in boosting the region's economic development.

Foreign investment brings opportunities for industrialization. It's hoped that Southeast Asia can expand international cooperation and make the EV industry a driving force to empower its industrialization. In this process, we hope Southeast Asian countries remain vigilant to avoid falling into a trap set by the US and some other Western countries, which aims to pin the label of "overcapacity" on EV exports and disrupt normal economic cooperation.

US officials have started a smear campaign based on the false "overcapacity" narrative. Trade protectionism is rising in the US and some other Western countries, as they are ramping up tariffs on Chinese-made EVs. Some Western countries may believe that protectionist tariffs can discourage EV imports and help boost their local EV industries, but the opposite is true. Southeast Asia's story proves that free trade and fair competition are what promote the development of the EV industry and contribute positively to economic growth.

Southeast Asia's booming development in its EV industry could serve as a reminder that the US and some other Western countries need to rethink their trade strategies toward EVs to restrain the rise of protectionism, and get mutually beneficial international EV cooperation back on track.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn