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Introduction to the Excise Tax Reform for Automobiles
The Excise Department is in the process of re-evaluating the excise tax structure for automobiles, with a focus on incorporating the use of local content. This initiative aims to stimulate the domestic auto parts industry by creating financial incentives for vehicles that incorporate locally manufactured components.
Key Points from the Deputy Finance Minister
Deputy Finance Minister Paopoom Rojanasakul emphasized that imported electric vehicles (EVs) which contain a significant amount of domestically produced parts will be eligible for a reduced excise tax rate compared to those with minimal local content. This strategy is designed to encourage the automotive sector to prioritize the use of local components, thereby boosting the domestic supply chain.
Impact on Import Taxes
Vehicles that are entirely imported or fully built-up units are expected to face higher excise taxes. This policy shift is intended to create a more level playing field for local manufacturers and incentivize the production of EVs within Thailand.
Collaboration Between Government Bodies
Implementing local content requirements for imported EVs involves close cooperation between the Finance Ministry and the Board of Investment (BoI). The BoI plays a crucial role in promoting investment in EV manufacturing and supports measures that encourage the use of local content in EV production.
Insights from Former Premier Thaksin Shinawatra
Thaksin Shinawatra, the former premier, highlighted the need for the government to impose high excise taxes on imported EVs that do not meet minimum local content standards. He pointed out that Thailand’s free trade agreements (FTAs) with certain countries have led to zero import tariffs on EVs, which has negatively impacted the domestic auto industry.
Historical Context of Free Trade Agreements
Thailand’s FTA with China, established around 20 years ago under the ASEAN-China FTA framework, initially set zero tariffs on imports, including EVs. At the time, EVs were not widely recognized, and officials viewed them as golf carts, anticipating minimal impact on the domestic auto industry.
Focus on Pickups as the First Category
According to an anonymous source from the Finance Ministry, pickups will be the first category of vehicles to have excise taxes linked to local content. Thailand serves as a regional hub for pickup production, making this a strategic focus for the new tax policy.
Role of the Board of Investment
The BoI is responsible for promoting investment in EV manufacturing and considers the auto industry as a key driver of the Thai economy. With over 2,000 auto parts manufacturers and approximately 900,000 employees, the domestic supply chain is a vital component of the industry.
Growth of Electric Vehicles
From 2022 to 2024, there was a significant surge in the popularity of battery EVs, plug-in hybrid EVs, and hybrid EVs. EV registrations increased from 84,500 units in 2022 to 206,000 units in 2024. During this period, 644 projects applied to the BoI for investment promotion in EV production and parts, with a combined investment value exceeding 280 billion baht.
Government Incentives for EV Manufacturers
The government’s EV promotion measures include subsidies for manufacturers importing vehicles for domestic sale, which can be passed on to consumers as discounts. However, these subsidies come with conditions: manufacturers must establish EV production facilities within Thailand to offset the imports.
Specific Requirements Under the EV3.5 Scheme
Under the EV3.5 scheme, manufacturers are required to produce twice the number of vehicles as those imported by 2026, and three times the volume of imports by 2027. If these targets are not met, the subsidies received must be returned to the government. This approach ensures that the benefits of the subsidy program are aligned with the goal of increasing local production.
