Thailand’s burgeoning electric vehicle (EV) industry faces a critical juncture as incentives supporting local production are set to expire, sparking concerns about a potential surge in Chinese EV imports that could disrupt the domestic automotive sector and its supply chains. Industry leaders are urging the government to implement new protective measures to ensure the nation’s long-term competitiveness as a regional EV manufacturing hub.
Navigating the Incentive Expiration
Currently, Thailand offers tax cuts and subsidies to companies establishing battery electric vehicle (BEV) assembly plants within the country. This scheme has successfully attracted investment and boosted domestic EV production. However, the impending expiration of these incentives has raised alarms. Industry insiders fear that Chinese manufacturers, potentially scaling back their own production, might pivot to exporting vehicles to Thailand. They could leverage the zero-tariff provisions under the Asean-China Free Trade Agreement, flooding the market with imported EVs and undercutting local manufacturing efforts.
Suwat Supakandechakul, chairman of the Automotive Industry Club under the Federation of Thai Industries (FTI), highlighted the potential repercussions. He warned that an influx of imported EVs could destabilize Thailand’s established car production capabilities, potentially leading to a crisis for local manufacturers. The impact would extend to auto parts makers as well, who stand to lose significant purchase orders as imported vehicles gain market share.
Calls for Enhanced Protective Measures
In response to these growing concerns, industry associations are actively lobbying the government for stronger policies. Earlier this year, the EV Association of Thailand, alongside nine other industry groups, formally requested the adoption of measures designed to safeguard domestic production. Key proposals include:
- Mandating that EV factories increase their use of locally sourced components.
- Adjusting excise tax rates to create a more significant price difference between imported and domestically manufactured EVs.
The overarching objective is to incentivize manufacturers to ramp up local production and reduce their dependence on imported vehicles and parts. Thailand, which once produced nearly 2.4 million vehicles annually, aims to re-establish its automotive prowess, this time with a focus on electric mobility.
Local Content Requirements Under Scrutiny
Industry leaders are pushing for stricter enforcement and potentially higher local content requirements. Mr. Suwat emphasized the need for Chinese automakers to incorporate a greater proportion of local content into their vehicles. This, he argued, would not only protect the existing auto industry but also propel Thailand toward its strategic goal of becoming a leading regional EV production hub.
Under existing regulations, BEV manufacturers that receive Board of Investment incentives are required to ensure that domestic EV parts constitute at least 40% of their total component costs. For plug-in hybrid EV manufacturers, this threshold is set at 45%. However, industry stakeholders contend that without more robust enforcement and potentially elevated requirements, Thailand risks forfeiting its competitive advantage.
Trade-in Scheme Uncertainty
Mr. Suwat also suggested a reconsideration of the government’s trade-in scheme. This initiative was designed to stimulate domestic car sales by encouraging consumers to trade in older vehicles for new EVs or hybrids. However, a source within the Finance Ministry indicated that the scheme might be put on hold due to unresolved complexities. These include defining eligibility criteria for older vehicles, establishing fair valuation methods for used cars, and determining appropriate disposal or export channels for the traded-in vehicles.
Chinese Automakers’ Commitment and Localization Efforts
Despite the apprehensions voiced by Thai industry leaders, Chinese automakers have expressed a strong commitment to long-term investment in Thailand. Chris Wu, vice-president of Changan Auto Sales (Thailand), stated that the company views localization not as a challenge, but as a significant opportunity.
“Changan respects the vital role that local automotive and auto parts associations play in safeguarding Thailand’s industrial heritage,” Mr. Wu commented. “We view these proposals not as a threat, but as a clear call to action for the transition towards genuine localisation.”
Changan has already transitioned its operations in Thailand from importing completely built-up units to establishing local manufacturing at its Rayong plant. The company has pledged to increase its local sourcing of EV component costs to 70% by 2027 and aims for 80% by 2030, significantly exceeding current regulatory requirements.
Vehicles manufactured at Changan’s 10-billion-baht facility in Rayong are already being exported to right-hand-drive markets, including the United Kingdom. Mr. Wu stressed that Changan is focused on building a comprehensive localized supply chain, rather than merely assembling vehicles. The company is investing in a dedicated local battery manufacturing plant, which will enable direct sourcing of battery packs within Thailand.
“We are here to stay, build and grow alongside the Thai economy,” he affirmed. Changan’s strategy in Thailand is integral to its global “Vast Ocean” initiative, positioning the country as a key export hub outside of China. The company plans to expand its Rayong plant’s capacity to 200,000 units annually, supporting a robust and sustainable product lineup.
Mr. Wu reiterated Changan’s corporate philosophy, encapsulated by the strategy “Thailand, for Thailand.” By integrating Thai Tier 1 suppliers into its operational framework, Changan aims to strengthen local supply chains and ensure its activities contribute directly to the Thai economy.
An Uncertain Outlook for Domestic Production
Notwithstanding these assurances from Chinese manufacturers, Thai industry leaders maintain a degree of caution regarding the future landscape. The FTI has set an ambitious production target of 1.5 million units by 2026, with 950,000 units earmarked for export and 550,000 for the domestic market.
However, Surapong Paisitpatanapong, an advisor and spokesperson for the FTI’s Automotive Industry Club, expressed concerns that geopolitical tensions, including conflicts in the Middle East, could jeopardize the export targets. The domestic market also presents its own set of challenges. The pickup truck segment, historically a strong performer for Thailand, has experienced declining sales for several years.
Mr. Suwat pointed out the need for increased government support to revitalize demand in the pickup segment, which would also benefit the approximately 1,500 auto parts manufacturers affiliated with the FTI. “The pickup segment used to generate significant economic value, but sales have been weak for a long time,” he stated. “Without new measures, both manufacturers and suppliers will suffer.”
The coming months will be crucial as Thailand’s government weighs the economic benefits of attracting foreign investment against the imperative of nurturing its domestic automotive industry and supply chain in the rapidly evolving global EV market.
