Where to Manufacture in 2025? Cost Comparison of China, Thailand, and India
“China Plus One” strategies are reshaping sourcing decisions. Companies are weighing alternatives such as India and Thailand, analyzing total cost including labor, materials, logistics, regulatory factors, and strategic risk to decide where to manufacture and align with new global trade and production realities.
This blog assesses manufacturing cost drivers across China, Thailand, and India, comparing labor expenses, supply-chain maturity, infrastructure, trade policy, sector-specific strengths, and strategic outlooks. It provides a decision matrix to help manufacturers identify the most cost-effective and strategically viable sourcing location in 2025.
Why 2025 Signals a Major Shift in Global Manufacturing
Global companies are actively pursuing a “China + 1” strategy. This approach does not mean leaving China entirely but rather expanding manufacturing operations into other countries, particularly India and Thailand, to diversify risk and reduce costs.
China, once the world’s go-to for low-cost manufacturing, has seen labor and operating costs rise steadily over the past decade, with wages increasing by 6 to 10 percent annually. These rising expenses are gradually eroding its cost advantage.
Meanwhile, India is positioning itself as a strong alternative through government-led initiatives like Make in India, aimed at attracting foreign investment and increasing its share in global manufacturing. While progress has been slower than expected, the potential remains significant.
Thailand, on the other hand, offers a stable, mid-cost manufacturing environment with a highly skilled workforce, especially in sectors like automotive and electronics. However, its relatively higher labor costs compared to other regional players may make it less suitable for companies focused strictly on cost minimization.
What Drives Manufacturing Costs
The basic cost formula remains: Total Manufacturing Cost = Labor Costs + Direct Material Costs + Manufacturing Overhead.
- Labor costs include base wages plus social benefits, turnover rates, and productivity.
- Materials and components may be sourced locally or imported.
- Overhead captures energy, utilities, logistics, land, regulatory compliance, and capital amortization.
- Additional factors like quality, automation, finance costs, and escalation risk also influence sourcing decisions.
China, India, or Thailand? A Comparison of Asia’s Leading Manufacturing Hubs
In 2025, China, Thailand, and India emerge as top manufacturing destinations—each with unique strengths and challenges across key factors like labor costs, supply chain infrastructure, production capacity, and global trade access.
Labor Cost & Workforce Dynamics
China
China's labor costs have increased significantly in recent years, with manufacturing wages now averaging between US$6 and $8 per hour, depending on the region and skill level, well above the rates seen a decade ago. In addition to rising base wages, mandatory social contributions such as pensions and medical insurance add another 30 to 40 percent in overhead. Despite these higher costs, China continues to maintain strong productivity and low error rates, thanks to its advanced automation systems and well-developed training infrastructure.
India
Manufacturing wages in India are among the lowest globally. Reports indicate India remains highly cost‑efficient, with wages well below China. Although exact per-hour data varies, Indian labor costs in comparable manufacturing sectors often sit at about half or less than in China. India also benefits from a large English-speaking skilled workforce, improving coordination and quality potential .
Thailand
Thailand occupies a middle tier, with daily manufacturing wages historically around US $6 to $9 per day (approximately US $5 to $6 per hour), lower than China’s recent rates but higher than those in India and Vietnam. Productivity is moderate, but turnover and automation still lag behind China.
Raw Materials & Supply‑Chain Ecosystem
China
China’s densest supplier clusters across electronics, textiles, auto components and more make it exceptionally efficient. Vertical integration, local sourcing, and proximity to key materials reduce lead time and cost.
India
While infrastructure and domestic supply chains are growing rapidly under programs like Make in India, supply‑chain fragmentation persists. For components like semiconductors, India is investing heavily (e.g. fab projects in Dholera, Maharashtra, etc.) but still relies largely on imports for high‑precision items.
Thailand
Thailand is strong in regional supply chains, particularly for automotive parts, mid-tier electronics, apparel, and food processing. However, it lacks the deep supplier network and integration found in China, often relying on critical components imported from China or other ASEAN countries.
Infrastructure, Logistics & Overhead
China
China maintains world‑class infrastructure, featuring high-speed logistics networks, efficient seaports, multi-modal transport systems, reliable utilities, and densely developed Special Economic Zones (SEZs) that cut per-unit overhead significantly. As a result, logistics costs in China account for just 8 to 10 percent of GDP.
India
India’s logistics infrastructure is steadily improving but still faces challenges. Logistics costs remain relatively high at 13 to 14 percent of GDP, driven by slower port operations, customs delays, and fragmented industrial zoning. However, large-scale initiatives such as the development of Special Economic Zones in places like Dholera aim to address these issues by streamlining industrial land access and upgrading utility infrastructure.
Thailand
Thailand benefits from major industrial parks and efficient ports like Laem Chabang. Its logistics infrastructure is sound regionally, with moderate energy costs and overheads. However, it’s less optimized than China in scale.
Trade Policy & Regulatory Environment
China
China maintains a strong export position, through its highly developed infrastructure and supply chain systems. However, rising international scrutiny, increasing trade barriers, and stricter domestic regulations, particularly around environmental and industrial compliance, are driving up costs in key sectors such as steel, electronics, and textile manufacturing.
India
Supported by the Make in India initiative, India offers tax incentives, subsidies (PLI schemes), and FDI liberalization. Nonetheless, policy execution is uneven: high average import tariffs (~18%) on components, slower customs, and regulatory hurdles still elevate cost and complexity compared to China (~7% tariffs).
Thailand
Thailand enjoys favorable trade agreements via ASEAN and RCEP frameworks, reducing tariffs in regional markets. Though it lacks major bilateral trade luxury with Western markets, its regulatory environment is country‑friendly and politically stable.
Sector-Specific Strengths & Cost Drivers
Textiles & Apparel
China is automating apparel production, pushing into higher-value garments. India excels in cotton-based textile manufacturing, with wage rates notably lower. Thailand produces higher-quality mid-tier apparel for ASEAN exports.
Electronics & Automotive
China remains dominant in electronics with full-stack vertical ecosystems. Thailand is key in automotive assembly against ASEAN demand. India is rapidly scaling electronics: Google Pixel phones, Samsung laptops, Apple AirPods (from 2025) are being made in India under PLI and other schemes.
Heavy Industry & Raw Materials
China retains cost advantage in energy-intensive sectors like steel, thanks to abundant coal-powered energy. India’s Tata Steel has recently improved margins via raw material cost reductions, helping competitiveness in domestic and export markets.
Cost Index & 2025 Benchmarks
A composite cost model would sum:
- Fully burdened labor (wage + benefits + overhead)
- Material sourcing cost & lead time
- Utilities, rent, logistics
- Compliance/regulatory cost
- Productivity (yield, defect/rework rate)
Published indexes place India as the lowest cost country globally, followed by China then Thailand. However China often offsets higher labor rates via greater productivity and yield control. Several cost-ranking sources place countries roughly as:
| Country | Cost Rank (2025) | Relative Cost Index | Notes |
|---|---|---|---|
| India | #1 – Lowest-cost manufacturing | 70–75 | Cheapest overall; strong labor cost advantage |
| China | #2 | 100 (Baseline) | High infrastructure and supply chain efficiency offset rising labor costs |
| Vietnam | #3 | Not specified | Competitive in textiles and electronics; limited scale vs. India/China |
| Thailand | Trailing behind top 3 | 85–90 | Mid-range cost; skilled workforce but higher wages than India/Vietnam |
Strategic Trends & Outlook
The impact of the “China Plus One” strategy is becoming increasingly evident as companies actively diversify their manufacturing footprints to countries like India, Thailand, and Vietnam. This shift is driven by the need to mitigate geopolitical risks, reduce exposure to high tariffs, and avoid overdependence on a single source, particularly China.
According to Bank of America analysts, even if tariff pressures ease, businesses are continuing to invest in “friend-shoring” strategies by relocating production to low-cost, stable economies such as India and Thailand to enhance long-term resilience and cost efficiency.
India is responding to this trend with a series of accelerated reforms. Post-election plans include easing labor laws, lowering import duties, and developing large-scale industrial zones with long-term lease options, such as those in Dholera. Additionally, the government is heavily investing in semiconductor manufacturing, aiming to capture 5% of global manufacturing by 2030 and 10% by 2047.
Meanwhile, China is advancing its industrial strategy through the “Made in China 2025” initiative. The focus is shifting from low-cost, labor-intensive production to high-value sectors such as smart manufacturing, robotics, and advanced technology exports. However, with labor costs continuing to rise, many companies are reassessing their reliance on China as their primary manufacturing base.
Decision Matrix for Manufacturers
Your ideal manufacturing location in Asia depends on what matters most: cost efficiency, supply chain strength, or risk diversification.
| Your Priority | Best Country | Rationale & Risks |
|---|---|---|
| Lowest labor + basic manufacturing cost | India | Labor rates are lowest; can deliver cost leadership; infrastructure improving but less integrated; tariffs & red tape remain risk. |
| Deep, mature supply-chain and high scale | China | Unmatched vertical integration, productivity, logistics; higher wages and geopolitical risk. |
| Mid-range quality, ASEAN access, balance | Thailand | Cost lower than China, closer to ASEAN markets, moderate infrastructure,
fewer tariffs; but less developed supply clusters. For those exploring Thailand as a sourcing destination, our guide First-Time Working with Suppliers in Thailand? Here’s What You Need to Know offers practical tips and key insights. |
Other key decision factors:
- Product complexity: high-tech and precision favor China, while simpler high-volume or labor-intensive goods may be more cost-effective in India or Thailand.
- Automation goals: China leads in factory automation, reducing labor dependency.
- Export destination: tariff regimes and trade agreements must shape sourcing decisions.
- Political and regulatory risk: India and Thailand offer diversified risk profiles relative to China.
Before finalizing any supplier partnership, make sure to review our checklist: 10 Things to Check Before Signing with a Manufacturer.
Plan Smarter in 2025 – Partner with AMREP Mexico
In 2025, India leads in overall manufacturing cost competitiveness, particularly in labor-intensive goods and fast-growing electronics assembly. China remains a powerhouse, especially for integrated supply chains, automation, speed to scale, and complex high-tech products. Thailand offers a compelling mid-tier alternative with balanced labor cost, good ASEAN integration, and regulatory stability.
Selecting the right manufacturing base depends on your product and strategy. India suits cost-focused expansion, China excels in scale and infrastructure, and Thailand offers a balanced option for ASEAN markets.
At AMREP Mexico, we help businesses reduce sourcing risk and improve supply chain performance with expert on-ground support, supplier verification, and quality control solutions so you can manufacture smarter, closer, and with confidence.
