The government recently approved an array of incentives, including lower excise tax and import duties on significant auto parts, in a bid to make electric vehicles (EVs) more appealing to both car buyers and manufacturers.
What are the incentives for EVs?
The incentives recently approved by the cabinet aim to promote domestic manufacture of EVs between 2022 and 2025. The subsidies range from 70,000-150,000 baht, depending on the type and model of the vehicle.
A subsidy worth 70,000 baht is available per unit for passenger cars with a battery of 10 to 30 kilowatt-hours (kWh), while a 150,000 baht subsidy is available per car with a battery of more than 30kWh for completely knocked-down (CKD) and completely built-up (CBU) units.
CKD pickups with a battery size of more than 30 kWh can also receive a 150,000-baht subsidy per unit.
EV motorcycles priced up to 150,000 baht can receive an 18,000 baht subsidy for both CKD and CBU models.
In terms of lower excise tax and import duties on CKD and CBU vehicles, there is a customs duty reduction of up to 40% for battery electric vehicles (BEVs) with a retail price of up to 2 million baht.
A further discount on customs duty of 20% is available for BEVs with batteries exceeding 30kWh and a retail price of 2-7 million baht.
Lastly, the government reduced the excise tax from 8% to 2% for BEVs.
How much money is the government injecting into this EV scheme?
The cabinet approved 3 billion baht from the central budget in fiscal 2022 to fund the subsidy programmes. It also agreed in principle to provide a budget of 40 billion baht between fiscal 2023-2025 to promote EV consumption.
Government spokesman Thanakorn Wangboonkongchana divided the four-year plan to promote EVs into two parts.
From 2022-24, the incentives are meant to stimulate broader and faster adoption of EVs in Thailand by offering tax breaks and subsidies for imported and locally produced cars and motorcycles.
For 2024-25, the government will focus primarily on promoting domestically manufactured EVs while removing some benefits for imported vehicles, said Mr Thanakorn.
What are the purposes of the EV incentives?
The authorities initially set a target for EVs to make up 30% of total car manufacturing or around 750,000 of 2.5 million units by 2030.
However, the authorities decided to increase the target to 50% in March last year, following the rapid growth of EVs in many countries, especially in Europe.
The government also set out a 10-year plan for the auto sector to transition from fossil fuel-powered vehicles to EVs, starting from 2022.
The Electric Vehicle Association of Thailand (EVAT) reported Thailand registered 5,781 new EVs for use last year, including 3,673 electric motorcycles.
As more auto manufacturers pivot towards EVs, Thailand has a great ambition of becoming a regional manufacturing hub for the vehicles and their parts, as well as the use of zero-emission vehicles of all types, said Mr Thanakorn.
Who will benefit from the new incentives?
EVAT lauded the government's efforts, calling it a good start in developing the fledgling EV industry in Thailand.
EVAT president Krisda Utamote said the subsidies and lower excise tax for EVs will help prospective car buyers decide on their purchases more easily. He expects the industry to leapfrog going forward.
Furthermore, the package ensures global automakers in Thailand feel they can reap equal benefits from the state's EV promotion, said Mr Krisda. Many countries such as Germany, China and Israel have set up EV battery plants in Thailand.
Previously many car companies were concerned Chinese automakers would hoard the advantages available in the industry because China and Thailand signed a free trade agreement that grants zero import duties on general car components from China.
What are the effects of the EV incentives on Thailand's auto sector?
Pimchatr Ekkachan, senior economist at Krungthai Compass, told the Bangkok Post that despite these incentives, it may take up to a decade for the auto industry in Thailand to be ready to produce and market EVs effectively.
"It is very challenging for Thailand to transition from being a regional hub for producing internal combustion engine (ICE) cars to EVs," said Ms Pimchatr.
"It could be 5-10 years because the existing supply chains and infrastructure are tailored towards manufacturing bodies and parts for vehicles with ICE."
She said there's a growing trend towards EVs among car buyers, citing an increase in sales growth from 2,000 EVs in 2020 to 5,000 in 2021.
Ms Pimchatr said most buyers still prefer to own hybrid cars because Thailand lacks proper EV infrastructure, especially an insufficient number of charging stations.