Thailand has great plans for Electric Vehicles (EVs) vehicles. In March 2021, the National Electric Vehicle Policy Committee accepted the private sector’s call to bring the country’s EV plan forward by five years. This translates into half of the EVs sold in Thailand being produced locally by 2030, and plans that by 2035 all EVs will be produced locally. Thailand is expected to reach 1 million in 2028 -- an increase of 24% per year -- with Japanese-made plug-in hybrid electric vehicles (PHEVs) to drive the next generation of cars, says Krungthai Compass, a research house under Krungthai Bank (KTB).
Thailand is working hard to steer the automotive industry into EV production and sales. There are plans materializing and expectations that Thailand will see exponential growth in the EV market. If that is to come true then there is more work which needs to be done in order to make the transformation of Thailand into an EV manufacturing country. This also means there are some great opportunities for the savvy investor. The Thailand Board of Investment (BOI) has granted some investment promotion incentives to date however, there is still a long way to go in developing the related legal framework.
If Thailand is to successfully achieve the goal to transform into a regional EV manufacturing hub then there are several EV-related laws and regulations, both the existing ones and those being contemplated, which need to be reviewed or revised to provide clear policies and timeframes of the transformation. Without this work being completed there will be a hesitancy with regard to investors' confidence, especially domestic EV and EV battery manufacturers, and EV-related infrastructure and service providers in building an EV ecosystem.
The question is can Thailand, considering Thailand’s current manufacturing, infrastructure and market preference, reach the targets laid out?
The number of EVs in the market will continue to increase as countries phase out of fossil fuels and as global automakers continue to transition to EV manufacturing. Many countries, especially those in Europe, are ahead of Thailand significantly and have clear policies to support EVs as they are increasingly aware of a need to deal with climate change.
It is our understanding that as of now, although many companies have applied for BOI Incentives, none of these same companies have made any serious moves. Indeed some have even back peddled as many are concerned about whether their EVs will be able to compete in the market, despite enjoying lower excise tax. There are concerns with the Asean-China Free Trade agreement which has in it the lifting of import and export duties for electric vehicles. This trade agreement has resulted in EVs that are sold locally having a completely different cost structure. We are seeing as an example the MG ZS EV from China coming in with no import duty, while the Nissan LEAF from Japan having a 20% import duty. This does help support the idea to manufacture locally however the import of parts etc. is still not clearly identified and recent disputes on classification, such as was seen with Toyota earlier in 2021, leads to continued concerns.
We will need to proceed with caution here in Thailand. There is no doubt the world is moving to electric vehicles. This will happen regardless of Thailand's policies or usual Government catch up after the fact. We do need to be careful of the over confidence and speed at which Thailand can move. We see comments from knowledgeable and respected people such as Mana Nimitvanich, first vice-president of KTB, who expects demand for PHEVs to grow and eventually command a 93% market share of total EV sales. "Thailand saw registrations of EVs increase to 190,000 or around 1% of total cars in 2020," he said. Mr Mana believes Thailand has the potential to develop the PHEV (Plug in Hybrid Electic Vehicle) industry due to Thailand having been a production base for internal combustion engine (ICE) cars primarily for the Japanese OEM’s. "Thailand is a hub of car production in Asean and has strong supply chains for the automotive industry, so it can be a hub of PHEV production in the future," he said.
Can Thailand achieve its goal to be both the producer and consumer of EVs for the region? We will have to see what plays out over the next few years. The Thai government has promoted the local production of EVs with incentives such as a reduction in excise duty. Investments made with BOI support will see a 2% excise duty and will not be charged any from January 1, 2020, to December 31, 2022. All good however, it will take time to see if these incentives are strong enough to attract investors.
Consideration must be made for the top automakers like BMW, Mercedes-Benz, Volvo and even Tesla, who are shifting manufacturing units to China. Today both the Volvo and BMW EVs sold here in Thailand are imported from China, and looking forward Mercedes-Benz has indicated they plan to sell their China produced EQS in Thailand soon.
Many companies have said they are eyeing Thailand as an EV-production base, however we will have to wait to see which brand actually steps up with real investment and production first. Great Wall has taken a step in this direction but it remains to be seen where this will lead us.
EV is coming. Of that there is little doubt, however, Thailand will inevitably follow the world and pass legislation post global standards as they have done in the past. Our advise is proceed with caution, base your decisions on what the world is doing and not what Thailand says it is doing. Thailand will not be the leader here, however, they can be, and in our opinion will be, a tremendous base for manufacturing and export. The government just needs to get out of the way so business can make things happen.
