Thailand eager to cement its status as 'Detroit of S-E Asia' with EV push

Bangkok

KNOWN for its strength in manufacturing automobiles, Thailand is now eager to cement its position as the "Detroit of South-east Asia" and be a regional leader when it comes to the growing electric vehicle (EV) market.

Earlier this month, China's Great Wall Motors Company (GWM) announced plans to build nine automobile models in Thailand, seven of which would be EVs.

The firm's managing director for Thailand, Narong Sritalayon, said it was "creating a line-up that will breathe new life into Thailand's automobile scene".

That may be especially true for the EV scene, given China's cutting edge in this relatively new automotive technology.

Last year, GWM purchased the Thailand-based automobile assembly plant discarded by General Motors as part of their broad-based withdrawal from the Asian market.

GWM will also likely apply for the Board of Investment's (BOI) second phase of tax benefits for locally produced EVs announced last November, as a follow-up to its first phase EV promotional package that was launched in 2017.

These promotional programmes managed by the BOI highlight the government's recognition that it will need to shift local automotive production from internal combustion engine (ICEs) vehicles to EVs, in order to keep up with international auto industry trends.

Thailand won its status as an international auto production hub (ranked 11th worldwide) by drawing mostly Japanese manufacturers to its shores over the past four decades, chiefly via a wide array of tax benefits such as waiving corporate income taxes and lowering excise taxes on domestic sales.

Back in the 1980s, Thailand lowered the excise tax and offered BOI tax benefits for manufacturers of one-tonne pickup trucks, which account for 50 per cent of domestic sales of vehicles, and 50 per cent of vehicle exports.

The policy succeeded in turning Thailand into the world's second-largest manufacturing base for pickup trucks which also became a major leading export item.

In 2010, the country started to promote the production of "eco-cars", small fuel-efficient models which had to meet European emission and safety standards.

Again, the policy succeeded in attracting mainly Japanese investors, who sold these models both domestically and to the export market.

In 2015, authorities began looking into promoting EVs, launching the first BOI package in 2017.

The first package attracted 26 projects worth an estimated 78.1 billion baht (S$3.44 billion) with a combined capacity to produce 566,000 units per year.

There are different types of EVs out there. Thailand's first EV promotion package drew investments from multinational auto manufacturers chiefly in hybrid EV (HEV) models, which are better suited to Thailand's domestic market.

To date, there are only 1,100 EV charging stations in Thailand, most of which are in Bangkok, so a hybrid EV car makes more sense that a 100 per cent battery electric vehicle (BEV).

Of the auto makers that applied for privileges under the BOI's first phase EV package, seven are already in commercial production.

These are Nissan, Honda and Toyota for HEVs, Mercedes Benz and BMW for plug-in hybrid electric vehicles (PHEVs), and two startups - FOMM and Takano - making BEVs.

In 2020, total domestic sales of the various types of EV models reached about 37,000 units, or 10 per cent of all passenger car sales. This is higher than the 29,000 units in 2019, which made up around 27 per cent of all passenger car sales.

It's worth noting that last year was a bad one for vehicle sales in general due to the Covid-19 pandemic. Domestic vehicle sales reached 775,736 units in 2020, down 21 per cent year-on-year. Only EVS saw a jump last year.

Under the government's roadmap, it has targeted that by the year 2030, 30 per cent of local auto production will be EVs, or about 750,000 units for both the domestic market and exports.

The BOI's new incentive package for EVs has been broadened to provide benefits to manufacturers of buses, trucks, motorcycles and tuk-tuks (three-wheel vehicles) and several EV parts such as battery cells, high voltage harnesses, reduction gears and battery cooling systems.

These tax incentives remain one of the key draws for automobile companies to set up their EV production in Thailand, which already has a well-established auto parts supply chain for ICE vehicles.

"Thailand is the only country in South-east Asia with a policy to specifically promote HEV with benefits from the government," said Titikorn Lertsirirungsun, manager of South-east Asia at consultancy company LMC Automotive.

He added: "From the point of view of OEM (original equipment manufacturer), I think Thailand is still one of the best places to invest as an HEV hub in the region and it is easy to export from here too."

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