Thailand Approves Incentives to Promote Electric Vehicle Adoption and Manufacturing

On February 15, 2022, Thailand’s cabinet approved in principle a package of incentives to promote electric vehicle (EV) adoption in Thailand, with the aim of making the country an EV manufacturing hub in Asia. A week later, the cabinet approved further draft regulations including specific information on customs duty reductions and exemptions for certain types of imported EVs.

The plan includes both tax and non-tax incentives from 2022 until 2025. In the first two years (2022–2023), the package incentivizes the widespread use of EVs in Thailand by providing exemption or reduction of import duties and excise tax, as well as subsidies to increase the demand for EVs and attract investment in the EV industry. These incentives will cover the importation of completely built up (CBU) cars and motorcycles, and the local manufacturing of completely knocked down (CKD) vehicles in Thailand.

For the following two years (2024–2025), the plan promotes the use of domestically produced EVs by eliminating the exemption or reduction of import duties for CBU vehicles while maintaining the other incentives (e.g., reduced excise tax rates, and subsidies). The aim of this is to make the cost of CBU vehicles higher than locally produced vehicles to encourage operators to produce EVs in the country to meet increasing demand.

Additional measures encourage the manufacturing of EVs in Thailand, including exemption of import duties for parts imported between 2022 and 2025, and treatment of the value of imported battery cells as a cost of local manufacturing (up to 15% of an EV’s retail price). This is beneficial to local manufacturers of EVs, as their activities will be entitled to a more generous incentive package than importation of EVs.

At their meeting on February 22, 2022, Thailand’s cabinet further approved draft subordinate regulations, including specific reductions and exemptions of customs duty for CBU units of battery EVs. According to a draft notification, imports of CBU electronic vehicles in 2022–2023 will be eligible for exemption or reduction of customs duty as follows:

• EVs with a retail price of up to THB 2 million (approx. USD 60,600) will be entitled to 40% reduction of customs duty. If the applicable customs duty is already 40% or less due to reduction under a free trade agreement (FTA), the EVs will be exempt from customs duty.
• EVs with a retail price of THB 2–7 million (approx. USD 60,600–212,200) will be entitled to 20% reduction of customs duty. If the applicable customs duty is already 20% or less due to reduction under an FTA, the EVs will be exempt from customs duty.

These measures are intended to help achieve the government’s goal to encourage the use of EVs and promote their production in the country. The policy of EV promotion aims to lower the price of electric cars and motorcycles (i.e., battery electric vehicles, or BEVs) to compete with traditional vehicles.

These measures are expected to pass into law later this year, although the exact timing is not yet clear.

By Tilleke & Gibbins, Thailand, a Transatlantic Law International affiliated firm. 

For further information or for any assistance please contact thailand@transatlanticlaw.com

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