Thailand plans to introduce investment incentives for manufacturers of hybrid vehicles. (Photo: iStock)
Thailand, dubbed the "Detroit of the East," continues to roll out incentives for electric vehicles (EVs). On July 26, the Thailand Board of Investment (BOI) announced that manufacturers producing hybrid vehicles will benefit from a reduction in excise tax. The Thai government estimates that this move will attract at least 50 billion baht (about USD 1.4 billion) in new investments over the next four years.
New incentives to propel Thailand towards EV manufacturing hub
BOI Secretary-General Narit Therdsteerasukdi stated that the new incentive measures will support the transformation of Thailand's automotive industry towards vehicle electrification and the development of the overall supply chain. “Thailand has the potential to become a manufacturing hub for various types of electric vehicles, including both vehicles and components,” he added.
According to the plan, manufacturers of vehicles equipped with both internal combustion engines and batteries will see their excise tax reduced to 6% or 9%, depending on carbon dioxide emissions. If the investment amount reaches 3 billion baht (about USD 88 million) between 2024 and 2027, the manufacturers will be subject to a fixed excise tax starting in 2028, eliminating the original plan to increase the tax rate by 2 percentage points every two years.
In addition to the basic investment amount, manufacturers must ensure that hybrid vehicles use significant components produced or assembled in Thailand. Starting in 2026, batteries must be produced in Thailand, and from 2028, other essential components must also be locally sourced. Furthermore, the vehicle's carbon dioxide emissions cannot exceed 120 grams per kilometer, and advanced driver assistance systems (ADAS) must be equipped.
Narit mentioned that among the manufacturers currently producing hybrid vehicles in Thailand, seven have benefited from previous BOI incentive measures. These include four Japanese manufacturers—Toyota, Honda, Mitsubishi, and Nissan—and three Chinese companies—Great Wall Motor, MG, and Chery. The BOI anticipates that at least five of these companies will join the new program.
Among the manufacturers producing hybrid vehicles in Thailand, seven have benefited from previous BOI incentives, with Mitsubishi Motors being one of them. The image shows the Mitsubishi Motors factory in Thailand. (Photo: Mitsubishi Motors Thailand)
Chinese EV makers have impacted Thailand's automotive supply chain
In addition to reducing the excise tax, the Thai government has also cut import tariffs and provided subsidies to vehicle owners. These measures have successfully attracted the attention of electric vehicle manufacturers. Since 2022, a total of 24 companies, including recent entrants from China like BYD and Great Wall Motors, have invested in Thailand’s automotive industry, causing substantial effects.
While the Thai government is pushing for carbon reduction through electric vehicles, it has created serious challenges for local industry development. According to the Federation of Thai Industries (FTI), electric vehicle sales in the first half of 2024 surged by 41% compared to the same period last year, reaching 101,821 units.
This electric vehicle boom is putting pressure on the supply chain of local fuel vehicle manufacturers, leading to some component suppliers going out of business and even causing a situation of oversupply in the electric vehicle market, leaving manufacturers worried.
Source: Bloomberg, Bangkok Post, Nikkei Asia
