Thailand’s updated tax framework for electric vehicles (“EVs”) and hybrid electric vehicles (“HEVs”) to position the country as a leader in Southeast Asia’s EV production. The changes, approved by the National Electric Vehicle Policy Committee (“EV Board”), aim to encourage investment, boost local manufacturing, and align with global sustainability objectives.
Key Features and Impacts:
1. Incentives Linked to Investment:
– The new tax policy incentivizes manufacturers by offering excise tax reductions, dependent on substantial investments. The tax reduction for hybrid electric vehicle HEVs and mild hybrid electric vehicle (“MHEV”) manufacturers is contingent upon significant local investment of Baht 3 billion for HEVs and up to Baht 5 billion for MHEVs by 2028.
– This policy ensures that tax benefits are directly tied to industrial growth within Thailand, fostering job creation and technological advancement.
2. Environmental Goals Embedded in Tax Structure:
– Tax rates correspond with CO2 emissions, motivating manufacturers to prioritize low-emission technology. Vehicles emitting less than 100g/km of CO2 will be subject to a 6% tax rate between 2026 and 2032, while higher-emission models will face steeper rates.
– This structure aligns with international trends that leverage tax systems to promote environmentally friendly practices and reinforce Thailand’s commitment to reducing its carbon footprint.
3. Flexible Production Requirements for Battery electric vehicles (“BEVs”):
– The EV3.5 initiative introduces extended production timelines to address manufacturers’ challenges, such as reduced car sales and stricter local production ratios. This adaptation helps balance industry concerns while maintaining Thailand’s industrial targets.
4. Market Competitiveness Challenges:
– A potential issue arises from price disparities between imported EVs under the EV3.5 framework and those manufactured locally under EV3.0. Addressing this imbalance will be critical to ensuring fair competition and sustaining consumer demand.
Thailand’s Strategic Tax Reform to boost the EV Industry_Bangkok Global Law