New manufacturing hotspots are emerging in Southeast Asia and India

The shift away from China in manufacturing is being led by high-growth industries like renewable energy and electric vehicles (EVs), with Thailand attracting significant investment in EV production.

• High-growth industries like renewable energy and electric vehicles are driving the shift away from China, with Thailand attracting investment in EV production.
• Government incentives and free trade agreements are enticing manufacturing firms to relocate from China to countries like India and Southeast Asia.
• Lower costs for land, construction, and labor in emerging markets like India and Southeast Asia are making them attractive manufacturing locations compared to China.

While China holds the lion’s share of manufacturing FDI in the region, the gap is narrowing. Indonesia raked in $28.7 billion in investment last year, up $4 billion from the year earlier. Vietnam’s FDI in manufacturing climbed over 30% to hit $23.5 billion, according to JLL.

Peter Guevarra, Director of Research Consultancy, Asia Pacific at JLL, explains that the shift in manufacturing base beyond China is driven by the desire to diversify and create more resilient supply chains. This move offers companies multiple advantages by reducing vulnerability to geopolitical tensions and potentially boosting supply chain efficiency by locating closer to Southeast Asia, one of the world’s fastest-growing regions.

Rising costs for land, construction, and labor in China are increasingly favoring other emerging markets, where costs are often nearly half as much.

Manufacturing wages in India are less than half of China’s, with workers earning $2 per hour compared to China’s $5.58. JLL data shows.

Government incentives, such as India’s production-linked incentive scheme and free trade agreements like the ASEAN Free Trade Area, are further encouraging the move. Rising costs in China and significantly lower manufacturing wages in emerging markets like India are also contributing to the shift.

High-growth industries like renewable energy and electric vehicles (EVs) are leading the shift away from China, according to Michael Ignatiadis, Head of Manufacturing Strategy, Asia Pacific, JLL. Thailand, a well-established automotive powerhouse, is now seeing increased investment in EV production driven by global demand. Chinese EV giant BYD invested 17.9 billion baht ($500 million) to establish a new facility in Thailand to produce 150,000 EVs annually starting this year. In January, Chinese car manufacturer Great Wall Motor also started producing its Ora EV at its factory in Rayong, Thailand.

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