Spat obstructs EV battery production

The development of measures to promote the domestic production of electric vehicle (EV) batteries remains deadlocked because of differing opinions between the Finance Ministry and the Industry Ministry, says a National EV Policy Committee source who requested anonymity.

The source said the measures should have been finalised in October 2022, but there has been little progress, which the source attributed to a difference of opinions.

The Industry Ministry wants foreign and local battery manufacturers to set up plants in Thailand first in order to be eligible for government incentives.

The Finance Ministry wants to promote battery imports first, reducing the battery excise tax to 0% from the current 8%, as well as provide subsidies to support importers. Batteries with high capacity will enjoy a higher subsidy than those with lower capacity.

The reasoning is these incentives should reduce EV prices, sparking higher demand in Thailand.

The battery price accounts for half of the EV price.

According to the Finance Ministry's proposal, battery importers will also have to agree to establish battery plants in Thailand to substitute their imports if they want to qualify for the incentives.

They must begin production in the third year after obtaining the incentives. Production capacity in that year must be two times the number of their imported batteries during the first two years, before rising to three times in the fourth year.

The promotion of EV battery plants is in line with the cabinet's approval of measures promoting EV usage last February.

The demand for EV batteries is dependent on the demand for EVs. If a manufacturer is considering setting up a plant to produce batteries with a capacity of 8-16 gigawatt-hours, there needs to be demand of more than 100,000 EVs per year to make the plant worthwhile, said the source.

Bookings of EVs under the government's current incentive measures total 37,000 units as of this month.

The joint panel with representatives from both ministries is tasked with submitting measures they both agree upon for the consideration of the National EV Policy Committee.