Thailand's Board of Investment (BOI) revealed on July 26, 2024, a set of tax incentives meant to attract hybrid car makers to the nation. For manufacturers who promise large investments over the next three years, these Thai investment incentives include a cut in excise taxes. The goal is to attract at least three billion baht in investments, equivalent to approximately $87 million USD.
This action is considered as a reaction to the difficulties experienced by conventional automakers and suppliers of parts resulting from the flood of electric vehicles, especially from China, which has upset the market with aggressive price policies. Thailand wants to guarantee the sustainability of its automotive supply chain and balance its emphasis on totally electric vehicles by supporting hybrid cars.
Specifics of the Tax Breaks
The BOI’s announcement detailed a series of tax breaks for manufacturers of hybrid vehicles. These incentives include a reduction in excise taxes for hybrid vehicles produced between 2028 and 2032.
To qualify, manufacturers must invest at least three billion baht (approximately USD 88 million) over the next four years and incorporate locally produced parts into their vehicles. This move is expected to attract around 50 billion baht (USD 1.4 billion) in new investments.
Narit Therdsteerasukdi, the BOI’s Secretary-General, emphasized the importance of hybrid vehicles in the transition to EVs. “Thailand has the capacity to be a key producer of hybrid vehicles, and supporting hybrid production will preserve auto parts manufacturing,” he said.
He emphasized that this initiative is essential for maintaining the robustness of Thailand's automotive sector, which employs over 750,000 workers and contributes significantly to the national GDP. The new tax incentives are expected to preserve jobs and support local businesses, particularly those involved in auto parts manufacturing.
Requirements for Manufacturers
Manufacturers have to satisfy various requirements to take advantage of the new tax breaks. Among these are building cars with advanced driver assistance systems (ADAS) and making sure their carbon dioxide emissions don't exceed 120 grams per kilometer. Furthermore, batteries have to be made in Thailand from 2026 and other vital parts have to be locally obtained from 2028.
The BOI's policies are meant to promote the use of regional components and help the home supply chain grow. This strategy is supposed to increase Thailand's appeal in the worldwide automobile industry and draw more outside capital.
Economic Impact and Industry Response
Industry players have warmed to the Thai government's proposition. Some Japanese and Chinese manufacturers already gaining from existing incentives have indicated interest in growing their activities in Thailand. This growth is expected to give the local economy, which mostly depends on the automobile industry, a much-needed boost.
The new policies are also anticipated to stabilize the automobile parts sector, which has been experiencing challenges because of the fast change toward electric cars. Thailand wants to minimize some of the economic disturbances brought about by this shift by varying the kinds of automobiles manufactured domestically.
Final Thoughts
Thailand is strategic in the attempt to keep its leading automotive manufacturing base in Southeast Asia by introducing additional tax advantages for hybrid vehicle producers. These Thai investment incentives are meant to draw large amounts of money and guarantee a seamless shift towards greener automobile technologies.