Other BriefingsThailand Scaled-Down Subsidy Program Continues Backing for Locally Produced EVs
Thailand approved a new scaled-down subsidy scheme to support the production of electric vehicles in the country, thus further solidifying its position as a key hub in the Southeast Asian manufacturing scene.
On November 1, 2023, Thailand approved a scaled-down subsidy scheme, namely “EV3.5”, aimed at supporting the production of electric vehicles (EVs) within the country. The scheme offers a subsidy of up to a maximum of 100,000 baht (US$2,760) per car from 2024 to 2027.
The goal is to attract foreign investment and solidify Thailand’s position as a key player in the Southeast Asian EV manufacturing scene. With established Chinese brands already leading the way in Thailand’s EV market and European manufacturers showing interest, this move is set to shape Thailand’s future in the rapidly evolving EV industry.
In this article, we delve into the details of Thailand’s upcoming subsidy scheme, while exploring Thailand’s ambitions to emerge as a key player in the broader Southeast Asian EV manufacturing arena.
Thailand’s subsidy scheme for new EV purchase
With the introduction of the latest purchase subsidy scheme for domestically made EVs, Thailand is strategically positioning itself as a Southeast Asian EV production hub. From 2024 to 2027, the “EV3.5” scheme will offer a subsidy ranging from 50,000 baht (US$1397.02) to 100,000 baht (US$2,794.04) per car, signaling the government’s commitment to fostering the growth of the EV industry and attracting foreign investment.
The existing subsidy scheme, which spans from 70,000 baht (US$1955.83) to 150,000 baht (US$4,189.94) per EV, is set to expire on December 31, 2023, prompting the formulation of the updated EV3.5 scheme.
The reduction in subsidy amounts in the new scheme reflects the region’s evolving market dynamics, as an increasing number of buyers are opting for EVs.
Notably, the move is aligned with Thailand’s broader ambition to establish itself as a regional EV production hub by 2030, with the goal of EVs constituting 30 percent of vehicles sold. The Thai government, led by Prime Minister Srettha Thavisin, endorsed the EV3.5 scheme at a recent Board of Investment meeting, emphasizing its dedication to supporting the EV industry and attracting foreign investors.
While the specific budget for EV subsidies has not been disclosed by the Board of Investment, it is underscored that existing carmakers will receive support in transitioning to the “new EV era.” This initiative is part of Thailand’s comprehensive strategy to encourage the transformation of its automotive sector and accommodate the increasing demand for electric vehicles.
Potential impact of the new scheme
The outgoing subsidy program has played a pivotal role in stimulating the EV market, resulting in a remarkable surge in EV adoption. In the first nine months of 2023 alone, 50,340 EVs were added to the roads, surpassing the total of 9,729 units for the entire year of 2022.
As such, the new EV3.5 scheme, with its adjusted subsidy structure, is poised to continue to fuel the momentum of EV adoption in Thailand and further solidify the nation’s position as a key player in the regional EV manufacturing landscape.
This boost not only supports local manufacturers, but also attracts foreign investments, reinforcing Thailand’s standing in the regional EV manufacturing scene. The impact is clear: more interest, market growth, and Thailand making waves in the EV world.
Foreign investment in Thai’s EV market
The influx of foreign EV manufacturers, particularly from China, has been notable within Thailand’s EV market.
BYD, for example, is set to build a factory in Rayong Province, contributing to an annual production capacity of 150,000 EVs from 2024. China’s Changan Automobile is also planning to produce significant units of battery EVs and plug-in hybrid vehicles annually.
Meanwhile, other established Chinese brands, such as Great Wall Motor (Thailand) and SAIC Motor, have already made substantial contributions to Thailand’s growing EV market.
This trend aligns with the efforts of the recently established Special Operation Centre for Strategic Investment in Bangkok. This center is working to identify high-potential investors, facilitate high-level government meetings, and accompany Prime Minister Srettha Thavisin during crucial overseas trips to secure investment commitments.
Factors behind Thailand’s emergence as an EV production hub
Government commitment and fiscal incentives
Thailand’s steadfast commitment to becoming a regional EV production hub is evident in its government policies and targeted fiscal incentives. Recent incentive packages underscore the nation’s proactive approach to advance its EV industry.
Taking cues from successful EV adoption models in Nordic countries like Norway and Sweden, where substantial tax subsidies drove domestic market share to over 55 percent, Thailand aims to replicate this success through enticing incentives.
Moreover, this commitment is attracting attention from international players, with Germany, China, and Israel expressing interest in establishing EV battery plants within Thai borders.
Strategic response to short-term market dynamics
In the face of escalating gas prices due to geopolitical tensions, Thailand’s EV industry stands to gain in the short term. Electric vehicles emerge as a financially prudent alternative amid soaring fuel costs.
Although over half of Thailand’s electricity is currently generated from natural gas, the nation’s strategic reserve of 4.9 trillion cubic feet ensures self-sufficiency while promoting renewable energy adoption under the Power Development Plan 2018-2037.
Strategic location and infrastructure development
Thailand’s status as the primary automotive exporter in the region is fortified by its strategic geographical location at the heart of mainland ASEAN, encompassing a market of over 600 million people.
The Eastern Economic Corridor, Thailand’s industrial hub, provides an optimal ecosystem for developing and scaling innovations in the EV industry.
Notably, the ongoing expansion of the world’s third-largest gateway port, Laem Chabang, further enhances Thailand’s logistical prowess, poised to increase car exports from 2 million to 3 million units annually by 2029.
Conclusion
As the Thai government strategically positions itself to attract high-potential investors, including major tech players, and fosters an environment conducive to EV growth, Thailand is poised for a transformative period.
The ongoing commitment to fiscal incentives, strategic responses to short-term market dynamics, and the strategic location and infrastructure development all contribute to Thailand’s emergence as a key player in the Southeast Asian and global EV manufacturing scene.
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