Thailand plans new tax breaks to lure hybrid auto investment

Thailand plans new incentives for hybrid automakers in a bid to attract at least 50 billion baht ($1.4 billion) of new investment over the next four years. Manufacturers of hybrid cars — which have both electric and internal combustion engines — will pay lower excise tax rates between 2028 and 2032 if they meet specific criteria, Narit Therdsteerasukdi, secretary of the National Electric Vehicle Policy Committee, told reporters Friday.

Eligible hybrids with fewer than 10 seats will be subject to excise tax rates starting at 6% from 2026, and will be exempt from a fixed rate increase of two percentage points every two years, Narit said. There are already separate incentives for makers of purely electric vehicles.

“This new measure will support the transition of the country’s automotive industry toward vehicle electrification and the future development of the whole supply chain," Narit said. “Thailand has the potential to become a production hub for all types of electrified cars, both complete cars and parts."

The new scheme comes as Thailand aggressively rolls out EV incentives, which have helped attract a flurry of foreign investments in recent years, particularly from Chinese manufacturers. The country, often referred to as “the Detroit of Southeast Asia," aims for 30% of its car output to be electric by 2030.

To qualify for the reduced tax rates, makers of hybrid cars must invest at least 3 billion baht in the Thai electric vehicle industry between now and 2027. Vehicles produced under the scheme must comply with strict carbon dioxide emission requirements, use key auto parts assembled or manufactured in Thailand, and feature at least four of six specified advanced driver-assistance systems.

At least five of the seven hybrid automakers already operating in Thailand are expected to enroll in the program, Narit said. The EV board’s decision will now be submitted to the cabinet for consideration and final approval.

Demand for EVs is booming in Thailand after the government cut import and excise taxes and gave cash subsidies to buyers in exchange for a commitment from automakers to start local production — all part of a renewed push to uphold its long-time standing as a regional auto hub.

Thailand has attracted investment from 24 EV makers since 2022, according to Narit. New registrations of battery-powered electric cars rose to 37,679 units in the first half of 2024, a 19% increase from the same period last year.

Sales of all-electric vehicles jumped 41% in the first half of the year to 101,821 units from the same period last year, according to automobile sales data by the Federation of Thai Industries on Thursday. Meanwhile, overall domestic auto sales dropped by 24% in the six-month-period, mainly because of falling demand for pick-up trucks and internal combustion engine passenger cars.

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