Thailand designing new EV tax policy around investment, export production and higher-value local content

Malaysia isn’t the only country in the region where an upcoming automotive policy stresses localisation as a key consideration in determining tax incentives for automotive companies. Over in Thailand, the country’s excise department is said to be in the process of designing the country’s next automotive tax framework around the lines of investment and increasing higher-value local content, as well as the scaling up of electric vehicle (EV) production for export.

The specific tax measures have not yet been finalised, with the director-general of the excise department, Pornchai Thiraveja, saying that work on the policy remained at the level of setting broad principles, The Nation reports, citing news agency Thansettakij.

The aim of the new policy is to address the industry’s long-term transition from internal combustion engine (ICE) vehicles to EVs. As indicated by the report, it will be guided by three objectives, which is to ensure that imports lead to domestic investment, expanding production sufficiently for Thailand to become an EV export hub and helping Thai suppliers move into higher-value components, systems and technologies.

The approach builds on the country’s previous EV3 and EV3.5 support measures, which were introduced to support learning among both consumers and manufacturers. The two programmes have brought eight to 10 factories in, including those from BYD, MG and GWM. About 170,000 EVs have been produced domestically, while investment in electric vehicles and parts has reached approximately 140 billion baht. The country now has a potential EV production capacity of up to 380,000 vehicles a year, with the industry creating around 25,000 jobs.

Thailand has spent more than 60 years developing its conventional automotive industry into an important regional production and export base, but the global shift towards electrification has changed the playbook, requiring it to adapt its manufacturing capabilities and remain competitive as the industry changes.

Pornchai said EV imports were necessary during the initial phase to allow consumers to become familiar with the vehicles and give the industry an opportunity to learn about the technology. However, the government did not want the country to remain merely a market selling imported vehicles, without generating wider benefits for the domestic automotive industry.

The two programmes were therefore designed to combine initial imports and market development with new investment and production in Thailand, with the objective being to help the country build on its established ICE manufacturing expertise while developing capabilities in EV technology.

At this stage, with battery technology, control systems and intelligent-vehicle technologies continuing to develop rapidly, further incentives are needed to attract new investment and prevent Thailand’s EV development from stopping at its current level, Pornchai said.

While the country continued to welcome new technologies and vehicle models so that consumers and businesses could embrace and learn from them, these should lead to investment and production in Thailand rather than merely being a point-of-sale. Aiming to expand on the two earlier programmes, the government expects further technological changes and new forms of investment, and said the policy had to continue creating conditions that attract manufacturers and technology providers.

Once the country has secured investment and established an EV production base, the next objective would be to increase manufacturing scale sufficiently to support exports. As indicated by the department, Thailand wants investments made in the country to look beyond meeting domestic demand and serve as a manufacturing base supplying EVs to international markets.

The final part of the strategy involves a greater involvement of Thai businesses in component manufacturing throughout the supply chain, with the aim of moving local content beyond basic components such as leather seats, rubber components or general assembly items towards systems and technologies that generate more value.

Pornchai said that the aim to increase higher-value local content will require cooperation between Thai manufacturers and overseas investors, stating that such cooperation could create benefits across investment, production, exports and the development of Thai businesses. He added that investors from several countries interested in establishing operations in Thailand have already held discussions with the government.

The excise department DG added that the future automotive tax policy would need to address both consumption and environmental considerations, saying that changes to the tax structure should therefore not be viewed merely as measures that raise or lower costs for consumers.

“The goal does not end with having EVs manufactured in Thailand. We must move forward to becoming an export base and ensure that Thai manufacturers participate in higher-value parts of the production supply chain,” he said.

Add paultan.org as a preferred source on Google SearchAdd Follow paultan.org on Google NewsFollow