- The decision by Thailand’s Board of Investment to re-introduce incentives to attract automakers into the country for electric vehicle production will cement the country’s position as South East Asia’s electric vehicle production hub.
- As the largest and most developed EV market in the South East Asia region, incentives will drive renewed interest from automakers and component manufacturers alike as a large domestic electric vehicle market remains a crucial element in attracting investments in EV production.
- We highlight the lack of consumer-focused incentives for the purchase of electric vehicles and an inadequate public charging infrastructure as a missing link in further driving the adoption of electric vehicles in the country.
We believe additional incentives announced by Thailand’s Board of Investment (BOI), such as excise duty reductions and corporate income tax holidays, will further entrench the country as South East Asia’s electric vehicle (EV) production hub. On November 4, 2020, Thailand’s BOI announced a new package of incentives for automakers looking to set up EV production in the country. With Thailand being the largest and most developed market for EVs in the region, incentives will attract automakers that did not take part in the first round of incentives, which expired in 2018. The new package now includes a full range of vehicle types such as passenger vehicles (PVs), commercial vehicles (CVs), motorcycles and tricycles. Incentives for battery module and battery cell production are also included, as well as the extension of critical EV automotive parts as part of the incentive package.
“Under the new package of incentives, PV projects with a total investment value of THB5bn (USD160mn) or higher will receive a three-year corporate income tax holiday for plug-in hybrid electric vehicle (PHEV) production (corporate income tax rate currently at 20%), whereas battery electric vehicle (BEV) projects will receive an eight-year corporate income tax holiday”
Under the new package of incentives, PV projects with a total investment value of THB5bn (USD160mn) or higher will receive a three-year corporate income tax holiday for plug-in hybrid electric vehicle (PHEV) production (corporate income tax rate currently at 20%), whereas battery electric vehicle (BEV) projects will receive an eight-year corporate income tax holiday. Motorcycles, tricycles and CV investments will be granted a three-year corporate income tax holiday.
Furthermore, the incentive package now includes investments into battery module and cell production, which includes a 90% reduction on import duties on raw materials for local battery manufacturing. In addition to this, battery cooling systems, regenerative braking systems, high-voltage harnesses and reduction systems are now considered as critical in establishing a domestic EV supply chain in Thailand, which qualifies them for an eight-year corporate tax holiday. We believe this will allow automakers to make significant reductions in prices for Thai-made EVs and further drive the adoption of such vehicles going forward as batteries make up a large part of EV prices.
The BOI’s announcement further improves the attractiveness of Thailand as a vehicle production location by further strengthening its automotive policy, which is fundamental in attracting automakers for local EV production. In our Autos Production Risk/Reward Index (RRI), which measures the attraction of markets that we cover relative to one another for automotive production operations, Thailand ranks as the second most attractive market for automotive production in the Asia region with an overall score of 69.5 out of a possible 100, versus the regional overall score of 57.0 and a global overall average score of 50.0 (see map above).
Thailand scores well under our ‘strength of automotive policy’ indicator with a score of 81.2, which is one of the indicators within our RRI looking into how comprehensive an autos policy is and how successful it is in attracting investment, as tracked in our investment round-ups. That said, we highlight the missing link in Thailand’s push towards EV adoption as being the lack of consumer-focused incentives to drive sales of EVs higher, which remains a crucial element in attracting automakers to assemble/produce EVs in the country.
In addition, the lack of an extensive public charging infrastructure network also remains one of the limiting factors in EV adoption, particularly for BEVs as a good coverage of charging infrastructure reduces range anxiety issues for interested buyers. Once these shortcomings are addressed, Thailand’s ambitious EV production target, of 30% of total vehicle production, will become more feasible.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. The original article can be accessed by clicking here