As the government increases efforts to build a low-carbon society, the infrastructure promoting the use of fossil fuels and manufacturing of vehicles with internal combustion engines (ICE) has become an issue.
The administration wants to reduce carbon dioxide emissions in the transport sector, as the automotive and aviation industries focus more on green energy.
During the transition to cleaner fuels, utilisation of fossil fuels will continue and ICE vehicles will still be used, though they emit carbon dioxide.
Prime Minister Srettha Thavisin even said he wants Thailand serve as a "last centre" of ICE production before the technology is phased out.
DUAL PROMOTIONS
Mr Srettha said the government will continue to support the production of ICE vehicles even as Thailand aims to become a hub of battery electric vehicle (BEV) manufacturing.
A source at the Finance Ministry who requested anonymity said Mr Srettha will travel to Japan in December to clarify to Japanese authorities measures to support ICE production.
"In order for Thailand to maintain momentum in promoting BEVs, we need to create more clarity as current incentives include subsidies for BEV buyers and tax measures, resulting in BEV sales surging to 50,000 units this year, the highest among Asean nations," said Mr Srettha.
"There must also be clarity on measures to support ICE production."
The Excise Department is expected to introduce a new automobile excise tax structure to support the reduction of carbon emissions, effective from 2026.
One proposal calls for ICE vehicles that emit carbon dioxide of less than or equal to 100cc to face a 13% excise tax, while those emitting more than 200cc are subject to a 34% excise tax.
The source said a dual policy to promote both BEVs and ICE vehicles is rational because it takes time for the global automotive market to shift towards EVs.
Annual vehicle production in Thailand totals around 2 million, with half allocated for exports.
The source said Thailand is a hub for pickup production, many of which are exported to developing countries. These need to be ICE vehicles because there is limited battery technology for electric pickups, said the source.
In order to have high traction power to support a heavy load, a larger battery is required, which adds more weight to the car.
The government plans to support vehicles with low emissions, in line with Euro 6 standards, and those using safe driving technology such as autonomous driving systems and sensors that keep cars in their lanes, said the source.
As for pickups, it would be difficult to improve engines to reduce carbon emissions, with the exception of hybrid pickups, according to the source.
Japan set a target for all of its car production to be clean energy vehicles by 2028, moving up two years from an earlier goal of 2030.
Mr Srettha reaffirmed to Tokyo that Thailand will continue to support the production of ICE vehicles for 10-15 years, as Japan helped to create this industry here.
"I would like to assure the Board of Investment the government will not forget the grace of the Japanese government or Japanese investors that has helped us the past several decades," he said.
Mr Srettha said Japan is concerned the Thai EV market will put it at a disadvantage from a business perspective, as Japan may be slow in transitioning to EVs.
Ahead of the premier's trip to Japan in December, discussions are planned between the government and the automotive industry to position Thailand as a hub for the downstream production of ICE cars.
The government also plans to offer some incentives for industries that relocate their manufacturing bases to Thailand for export.
APPROPRIATE POLICIES
Chaichan Chareonsuk, chairman of the Thai National Shippers' Council (TNSC), said the government should establish policies to help Thailand become a hub for production of automotive components for ICE vehicles, while driving a high-performance ICE automotive policy to maintain market opportunities during the transition to electric or other clean energy vehicles.
The global energy transformation is estimated to take around 30 years, yet demand for ICE cars and auto parts will continue during this period.
This substantial demand will allow the automotive component industry in the country, which includes many operators and a large workforce, to maintain business opportunities in the global market and sustain income from exports to after-market segments, he said.
Setting up a two-pronged policy (for ICE vehicles and EVs) is appropriate for the industrial structure in Thailand, which has a supply chain ready to accommodate demand for ICE vehicles during the transition, said Mr Chaichan.
He said uncertainty regarding the type of fuel to be used in the future will allow Thailand's auto industry to continue generating income for many more years, which could be used as capital to develop manufacturing of EVs and their components.
This would facilitate the competitiveness of Thailand's auto industry and integration into the global value chain, addressing the country's long-term goal of achieving net-zero carbon emissions, said Mr Chaichan.
He said the government's promotional policies should be clearly divided into two main categories.
The ICE group should be focused on international market policies, especially in Africa, the Middle East and other markets not yet prepared to transition to EVs, while policies to support the production of high-performance ICE vehicles should reduce emissions according to global standards, said Mr Chaichan.
The EV promotions should support investments and tax measures for passenger cars and vehicles to transport goods, aiming for lower cost of production to compete with ICE vehicles globally, he said. This should significantly improve exports and reduce carbon emissions, said Mr Chaichan.
EV manufacturing in Thailand still lags production of ICE vehicles, with the main imports completely built-up units.
The value addition of EVs to local manufacturers is only 34%, while for ICE vehicles the value addition of 53% to the country's industrial sector, he said.
"A sudden shift towards an EV policy might heavily impact operators and the workforce in the automotive industry. Thai manufacturers of ICE vehicles are projected to have their market share dip to 47% from 67% once the transition occurs to EVs," said Mr Chaichan.
"This change could require considerable funding and time to adapt to the new supply chain of EV makers."
Siam Commercial Bank supports sustainable finance in all customer segments in preparation for a net-zero target by 2030.
EV FUTURE
The state push for EV industry development does not ignore ICE manufacturing, as the "30@30" scheme only calls for EVs to make up 30% of total car production by 2030.
The scheme calls for a series of EV incentive packages to stimulate investment in zero-emission vehicle manufacturing, aiming for the production of at least 725,000 zero-emission cars and 675,000 electric motorcycles.
Under the plan, ICE vehicles comprise 70% of production, with 50% pickups and 20% passenger cars.
"I believe the transition from ICE vehicles to a 100% EV market will take a very long time," said Krisda Utamote, president of the Electric Vehicle Association of Thailand.
"ICE vehicles will continue to exist. They will not easily disappear from the world."
During a meeting between Mr Srettha and the Federation of Thai Industries last month, the prime minister stressed the need to help ICE businesses, which employ more than 600,000 people, as the country promotes greater use of EVs.
On Nov 2, the National EV Policy Committee chaired by Mr Srettha agreed to approve a new EV incentive package dubbed EV3.5 to replace the package set to expire on Dec 31 this year.
The new package covers 2024 to 2027 and has fewer incentives than the previous model, but auto executives believe it will continue to drive domestic EV industry development.
Both EV3.0, the previous package, and EV3.5 commit participating car companies, which are given subsidies and tax cuts, to building EV factories in Thailand.
Some EV makers previously raised concerns that EVs produced locally under EV3.0 may have higher prices than EVs imported under EV3.5, putting them at a competitive disadvantage.
Mr Krisda played down this concern, noting the government allows companies that were granted trade privileges under EV3.0 to take part in EV3.5 to earn new incentives.
He said he believes EV3.0 and EV3.5 will make investment in Thailand more attractive to global car makers.
"The EV industry is growing rapidly because of various factors, ranging from the government's push for development to geopolitical conflicts driving up oil prices and quick technological changes causing people to try new cars," said Mr Krisda.
EVs should help Thailand reduce carbon dioxide emissions and PM2.5 ultra-fine dust that plagues the country annually, he said.
SUSTAINABLE FINANCE
Siam Commercial Bank (SCB) supports EV-related businesses through its green loan programme to help Thailand cut carbon dioxide emissions.
Kris Chantanotoke, chief executive at SCB, said the bank has been transitioning to net-zero emissions and supports sustainable finance for all customer segments in preparation for a net-zero target by 2030.
SCB, the country's fourth-largest lender by total assets, reported sustainable finance for all customer segments surpassed 52 billion baht in the first three quarters.
The bank set a target of 100 billion baht in sustainable finance by 2025.
"We support sustainable finance for all customer segments, including retail, small and medium-size enterprises [SMEs], and corporate clients. The bank designed several financial packages in response to demand," he said.
The 52 billion baht worth of sustainable finance covers Thailand's 11 core industries, including tourism, energy and manufacturing.
In the first nine months of this year, SCB offered project finance to the renewable energy sector totalling 12.6 billion baht, while the EV industry received 10 billion baht, and related sustainable industries tallied 26.1 billion baht.
The sustainable finance tally granted to SMEs and individual customers exceeded 3 billion baht, reported the bank.
Mr Kris said the bank set a clear direction to achieve net zero goals as part of its environment, social and governance approach.
SCB initiated gradual changes in energy consumption at its headquarters to reduce greenhouse gas emissions, he said.
These changes comprise reducing energy usage in buildings by 10-15% through improved lighting, transitioning to LED bulbs, enhancing heat transfer systems for buildings, planning the installation of solar cells at the head office, replacing more than 3,000 air conditioners with environmentally friendly R32 refrigerant, and transitioning the entire vehicle fleet to 100% electric operation.
All of these changes are anticipated to be completed by 2028, said Mr Kris.
A Thai AirAsia A320neo is refuelled at Don Mueang airport. BOONSONG KOSITCHOTETHANA
FLYING RESPONSIBLY
Work to develop electric-powered aircraft gained interest from campaigns to cut carbon dioxide emissions, but a more promising effort is the promotion of biofuel for aircraft, known as sustainable aviation fuel (SAF).
SAF produced from non-petroleum-based renewable feedstock is expected to be the key mechanism to help reduce carbon dioxide emissions, with the International Air Transport Association (IATA) forecasting increased capacity of renewable energy sources at 69 billion litres by 2028.
Aviation is a major contributor to global carbon emissions, accounting for an estimated 12% of all transport sources.
The IATA roadmap calls for achieving net zero carbon emissions by 2050, with SAF accounting for 62% of the carbon reduction required by that year.
Santisuk Klongchaiya, chief executive of Thai AirAsia, said a few large energy companies in Thailand have started SAF production, which should eventually help decrease prices locally.
The price of SAF is 3-5 times higher than JET A-1, a kerosene-type fuel made specifically for airplanes, mainly attributed to limited supply of SAF, he said.
Mr Santisuk said airlines cannot avoid this shift as some countries already announced they will require airlines to use a certain percentage of renewable fuel to fly routes to their cities, such as Japan.
Japan announced this year a new mandate requiring airlines to use at least 10% SAF for their flights bound for Japanese airports by 2030.
He said the industry expects similar regulations in the near future as production capacity ramps up globally.
If airlines cannot comply with these regulations, they might have to find other methods to compensate for carbon emissions, such as buying carbon credits, said Mr Santisuk.
With geopolitical tensions in Ukraine and the Middle East greatly affecting oil prices the past few years, he said apart from turning to feedstock-based energy such as SAF, airlines have to adapt their strategies by lowering energy consumption.
Flying newly developed aircraft that reduce energy consumption is the most feasible solution, such as the Airbus A321neo that Thai AirAsia is buying, which can save on fuel consumption by up to 20%, said Mr Santisuk.
He said pilots must also revise flying manoeuvres to reduce energy consumption while still maintaining safety, such as changing the way they drive on taxiways.