Thailand pulling out all the stops in bid to become global electric-vehicle manufacturing hub
DESPITE Thailand’s automotive sector being the engine driving much of the country’s growth over the past 30 years, the government has warned that the industry is at risk because of the rapid global transition to electric vehicles (EVs).
South-east Asia’s second-largest economy - known for years as the “Detroit of Asia” for its long track record in manufacturing automobiles - is already speeding up its efforts to position itself as a global EV manufacturing hub.
At a recent seminar, Thai Prime Minister Prayut Chan-o-cha announced that the country will be able to assemble EVs domestically within a year, faster than the original 2024 target. He said batteries, traction motors, AC/DC converters, portable EV chargers, electrical circuit breakers and EV smart charging systems “should also be manufactured in the country in the near future”.
In a national broadcast on Jul 8, he noted that this is a time when auto manufacturers may choose to build new factories in other countries, and stressed the need for Thailand’s auto industry to raise its game and be more competitive.
“We must keep auto manufacturers (in Thailand), and we must make it easy for them to grow their business,” he said.
Thailand continues to remain attractive to major players in the EV space. Last week, Horizon Plus - a joint venture between Taiwan’s Foxconn Technology Group and Thailand’s state-run energy group PTT - said it has acquired 50 hectares of land in Thailand’s Eastern Economic Corridor to build a new EV production base. Construction is expected to start later this year, with production to begin sometime in 2024.
The local auto industry’s contribution to economic growth is substantial, accounting for 7-8 per cent of gross domestic product annually. Thailand’s automotive exports earned the country US$41.4 billion in 2021.
All of the major Japanese automotive brands have assembly plants in Thailand, as do European luxury brands Daimler and BWW, along with Ford Motors and Chinese newcomers MG and Great Wall Motors. .
The sector employs some 700,000 people, with the majority working in factories that supply parts to original equipment manufacturers (OEMs) and the so-called “after market”.
“Thailand’s automotive policy is well designed, compared with other countries in the region. We have done it step by step,” said Titikorn Lertserirungsun, the manager for Southeast Asia at market consultancy LMC Automotive.
The first step, taken in 1992, was the successful promotion via tax and other incentives of Thailand as a regional manufacturing hub for one-tonne pickups, both for the domestic market and exports.
In the years that followed, Thai authorities invited investments in the eco-car scheme with tax incentives and fixed production targets for participants, attracting the main brands from Japan - Toyota, Nissan, Mitsubishi, Suzuki, Honda and Mazda – which have all enjoyed strong domestic sales and steady exports.
In 2017, the Board of Investment (BOI) started promoting Thailand-based auto-makers to invest in EVs, including hybrid models. The BOI provided lowered excise taxes and other benefits if manufacturers also agreed to locally produce batteries, battery management systems, the domain control unit and tracking motor – all key components in EV production.
About a dozen international auto companies joined the scheme between 2017 and 2021, but mostly to produce hybrids.
The government upped the ante in February this year when it announced new tax incentives for full EVs, including cash subsidies of 75,000 baht (S$2,869) to 150,000 baht to be provided to OEMs in order to reduce their unit retail prices and boost sales.
Auto makers joining the programme are permitted to import EVs at low tariff rates until 2024, after which they must locally produce the same number they imported and start local production at a 1:1 import/local production rate.
So far, Chinese auto makers MG and Great Wall Motors are on board, along with Japan’s Toyota Motors. Germany’s Daimler has also indicated it will join soon.
“If you look at the scheme, I would say that a BEV (battery electric vehicle) car with a price tag of below 2 million baht is the government’s main target because it is for mass production, and it creates more volume,” said Krisda Utamote, president of the Electric Vehicle Association of Thailand.
There are similar incentives provided for the manufacturing of electric motorcycles and pickup trucks. Sales of EV passenger cars are expected to reach nearly 12,000 units this year, a marked improvement as only 1,955 EV cars were registered in 2021 along with 3,673 electric motorcycles.
Some analysts noted, however, that this is still a long way from the government’s target of having zero-emission vehicles account for 30 per cent of local production (or 750,000 vehicles in total) by 2030.
