BOI Explains Promotion of EV Industry to Position Thailand as a Global Automotive Production Hub

The global trend is moving towards clean technology vehicles with low carbon dioxide (CO2) emissions due to the escalating climate change crisis caused by greenhouse gas emissions, with the transportation sector being one of the largest contributors. Many countries are preparing to implement measures to ban the import of internal combustion engine (ICE) vehicles or impose taxes to control the import of high CO2-emitting vehicles. Meanwhile, Thailand’s automotive industry still predominantly produces ICE vehicles.

Additionally, under current free trade agreements, importing electric vehicles from some countries for sale in Thailand is already duty-free. Without any measures, there is a high likelihood that a large number of electric vehicles will be imported without establishing a production base in Thailand, leading to missed opportunities to attract EV industry investments to the country. This could also result in a loss of opportunities to grow with new technologies such as batteries, motors, electronic components for vehicles, and vehicle connectivity systems.

Therefore, to ensure that Thailand’s automotive industry remains competitive and aligned with global trends, and to maintain its position as the leading automotive production base in ASEAN and one of the top in the world, the government recognizes the need to promote the establishment of a modern, environmentally-friendly automotive production base. The National Electric Vehicle Policy Committee was established in 2020 to study and set the direction for the development of the EV industry, with a goal of producing at least 30% of all vehicles as Zero Emission Vehicles (ZEVs) by 2030, marking the start of Thailand’s transition to environmentally-friendly vehicle production.

To achieve this goal, the government has set out measures to promote the EV industry, building on the strengths of the existing automotive industry to establish a comprehensive production base for ICE, HEV, PHEV, and BEV vehicles. This will preserve and enhance Thailand’s leadership in all types of automotive industries in the long term, as well as provide opportunities to become a production base for exporting EVs to Europe and the United States, where import tariffs from some countries have been established.

Subsidizing the EV Industry under the EV3 and EV3.5 Measures

These measures aim to support the transition of the automotive industry to EVs according to the 30@30 target and push Thailand to become the main production base in the region by creating a sufficiently large domestic EV market to justify investment. This is a key factor that automobile manufacturers consider when deciding on investment locations.

The EV3 and EV3.5 measures will allow imports during the first two years, with conditions linked to investment in establishing a production base. Participants in these measures must produce EVs in Thailand to compensate for imports by at least 1 to 3 times, depending on the period. Additionally, there are conditions for using key locally produced components, which will help establish Thailand as a comprehensive production and export base for electric vehicles and components.

Support and Care for ICE Vehicle Manufacturers and Parts Producers

The government’s key objective is to drive Thailand towards becoming a central hub for the production and export of all types of vehicles, including ICE, HEV, PHEV, and BEV, as well as comprehensive automotive parts. This is reflected in the 30@30 target, which shows that 70% of production will still involve ICE vehicles. However, the technology must evolve towards being cleaner, more energy-efficient, safer, and supporting intelligent driving. Additionally, the Prime Minister has emphasized the importance of ICE vehicle manufacturers to the Thai economy and has expressed readiness to support the transition to modern vehicle production by introducing five measures to assist vehicle and parts manufacturers:

1. Investment Promotion Measures to Upgrade the Automotive Industry: These measures aim to encourage car manufacturers to invest in automating or robotic systems to improve production efficiency for ICE, HEV, and PHEV vehicles. Currently, four projects from Japanese and American car companies have applied for this promotion.
2. Investment Promotion Measures to Upgrade the Automotive Parts: These measures encourage domestic parts manufacturers to upgrade machinery, train personnel, or adopt modern technology to improve efficiency or elevate standards. This will enhance competitiveness or allow expansion into new industries, such as EV parts, electronics, aerospace, medical devices, machinery, and equipment.
3. Measures to Promote Joint Ventures Between Thai and Foreign Companies in Automotive Parts Manufacturing: These measures support Thai automotive parts manufacturers in forming joint ventures with foreign companies investing in Thailand. Thai legal entities must hold at least 30% of the shares, creating business opportunities and enabling Thai entrepreneurs to upgrade their automotive parts production technology to meet the demands of modern vehicles.
4. Excise Tax Reduction Measures for HEV: These measures encourage the transition from ICE vehicles to more environmentally friendly vehicles, with HEVs being a segment where Thailand has the potential to become a global production base. The key conditions for this measure include reducing carbon emissions, additional investments, using locally produced critical components, and installing vehicle safety systems.
5. Measures to Promote the Use of Domestic Parts: The Excise Department has set conditions requiring car manufacturers receiving benefits under the EV3 and EV3.5 measures to use locally produced batteries or critical components, such as drive motors, BMS systems, DCUs, inverters, reduction gears, or air conditioning compressors. Additionally, the Customs Department and the Ministry of Industry have stipulated that EV manufacturers located in free zones or free trade zones must undergo essential production processes, such as quality inspection and the production of key components, using parts and raw materials produced in Thailand and ASEAN, accounting for no less than 40% of the ex-factory price.

The BOI has also set conditions for EV car manufacturers receiving investment promotion to produce or procure batteries and critical components from domestic manufacturers, including a plan to develop local suppliers with a majority Thai shareholding. This includes technology training and technical support, which will help elevate Thai parts manufacturers, giving them the opportunity to learn and develop technology related to EVs, ultimately transitioning to become suppliers for the EV industry.

Additionally, the BOI emphasizes organizing domestic sourcing events and industrial support exhibitions (e.g., Subcon Thailand) to create platforms for business matching, promoting the purchase and sale of parts, contract manufacturing, or joint ventures between Thai and foreign entities. This is to ensure that Thai entrepreneurs play a significant role in the EV industry’s supply chain.