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Thailand introduces new tax incentives for hybrid vehicle manufacturers. (Photo: Electric Vehicle Association of Thailand)
To expand the development of electric vehicles (EVs), the Thai government has passed a new tax system aimed at hybrid electric vehicles (HEVs) and mild hybrid electric vehicles (MHEVs), offering conditional excise tax reductions for manufacturers.
Additionally, as overall vehicle market growth slows down, the EV3 incentives focused on battery electric vehicles (BEVs) will be extended to help manufacturers weather the downturn.
Incentives for hybrid vehicles with new tax system
Under the new regulations, for HEVs with carbon emission less than 100 grams per kilometer, the excise tax rate will be set at 6% from 2026 to 2032. For vehicles with emissions between 101 and 120 grams per kilometer, the rate will be 9% during the same period, a significant reduction compared to the previous system where the tax rate would increase by 2% annually starting in 2026.
However, manufacturers benefiting from the new tax system must invest at least THB 30 billion (USD 87 million) in Thailand between 2024 and 2027, use local components, and equip the vehicles with advanced driver assistance systems (ADAS).
For MHEVs, vehicles with emissions below 100 grams per kilometer will be subject to a 10% excise tax, while those with emissions between 101 and 120 grams will face a 12% tax rate. The basic conditions include an investment of at least 1 billion Thai Baht (US$29 million) by 2026 and an additional THB 5 billion(USD 146 million) by 2028, with a requirement to use local components.
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Thailand offers conditional tax incentives, requiring automakers to invest a specified amount in Thailand and use local components. (Photo: iStock)
Extension of EV Incentives amid slowing car market growth
In response to slowing car sales, the Thai government has decided to extend the EV3 policy, which provides subsidies, lower import duties, and excise tax reductions for BEVs, until 2025. The policy originally required manufacturers to produce electric vehicles in a 1:1 ratio with imported EVs, but this deadline has been extended until 2026. At that time, the ratio will be adjusted to 1:2, and the related incentives will gradually tighten.
According to statistics, between 2022 and 2023, manufacturers imported about 84,000 electric vehicles under the EV3 policy. By 2025, manufacturers will need to produce 124,000 vehicles. However, as Thailand's overall car sales have declined, authorities have decided to extend the production deadline to help manufacturers cope with the current surplus of vehicles in the market.
However, the automotive market appears to be worse than the government anticipated, with some car manufacturers considering withdrawing from the EV3 program. Suroji Sangsanit, president of the Electric Vehicle Association of Thailand (EVAT), stated that many industry peers are discussing forgoing subsidies due to decreased consumer purchasing power and stricter loan standards set by banks and automotive financing institutions.
The Federation of Thai Industries (FTI) noted that BEV sales in October dropped nearly 50% compared to last year, while sales of fuel vehicles also declined by more than 27%. Analysts believe that the Thai car market is caught in a price war, causing potential buyers to expect further price reductions, making them reluctant to purchase vehicles.
Source: Bangkok Post(1)、(2)、Taiger、Nikkei Asia
