Content fight shapes Thailand's EV future

Thailand's automotive industry is sounding the alarm over the looming end of the government's EV incentive scheme, known as EV3.5, next year.

Industry leaders fear that once the scheme expires, the country will face a flood of Chinese electric vehicle (EV) imports that could destabilise local car production and the auto parts supply chain.

The scheme provides tax cuts and subsidies to companies that invest in battery electric vehicle (BEV) assembly plants in Thailand.

While the programme has attracted investment and lifted domestic EV production, industry leaders caution that its expiration could leave Thailand vulnerable, as Chinese manufacturers may scale back production and turn to imports, taking advantage of zero tariffs granted under the Asean-China Free Trade Agreement.

Suwat Supakandechakul, chairman of the Automotive Industry Club under the Federation of Thai Industries (FTI), said an influx of imported EVs could undercut Thailand's car production, forcing local manufacturers into a crisis.

Auto parts makers would also bear the brunt, losing purchase orders as Chinese imports gain market share, he said.

PUSH FOR NEW MEASURES

The growing concerns have prompted industry associations to call for additional protective measures.

Earlier this year, the EV Association of Thailand and nine other associations urged the government to adopt stronger policies to safeguard domestic production.

Among the proposals are requirements for factories to use more locally sourced BEV components, as well as adjustments to excise tax rates that would widen the gap between imported and locally made EVs.

The goal is to encourage manufacturers to increase domestic production and reduce reliance on imports.

Thailand previously reached a peak of nearly 2.4 million vehicles produced annually.

Industry leaders nudged the government to aggressively introduce new measures to increase the use of locally made EV components.

Mr Suwat said Chinese carmakers should be required to use more local content in their vehicles, which would protect the auto industry and help the country achieve its long-term goal of becoming a regional EV production hub.

Under current rules, BEV manufacturers receiving Board of Investment incentives must ensure domestic EV parts account for at least 40% of total component costs. For plug-in hybrid EV manufacturers, the requirement rises to 45%.

Industry leaders argue that without stronger enforcement of local content rules, Thailand risks losing its competitive edge.

Mr Suwat also urged policymakers to reconsider the trade-in scheme, which was designed to increase domestic car sales by encouraging consumers to exchange old vehicles for new EVs or hybrids.

However, a Finance Ministry source who requested anonymity said the trade-in scheme may be shelved due to unresolved issues, including determining the eligible age for old vehicles, assessing the value of used cars, and deciding how the old vehicles would be disposed of or exported.

CHINESE REACTION

Chinese automakers insist they are committed to long-term investment in Thailand.

Chris Wu, vice-president of Changan Auto Sales (Thailand), said the company views localisation not as a threat, but as an opportunity.

"Changan respects the vital role that local automotive and auto parts associations play in safeguarding Thailand's industrial heritage," said Mr Wu.

"We view these proposals not as a threat, but as a clear call to action for the transition towards genuine localisation."

Changan has already transitioned from being a completely built-up importer to an active local manufacturer at its Rayong plant.

The company pledged to increase local sourcing of EV component costs to 70% by 2027 and 80% by 2030, well above current requirements.

Vehicles produced at its 10-billion-baht Rayong facility are already being exported to right-hand-drive markets such as the UK.

He emphasised Changan is building a localised supply chain, not just assembling cars.

The company is establishing a dedicated local battery manufacturing plant, which will allow it to source battery packs directly within Thailand, said Mr Wu.

"We are here to stay, build and grow alongside the Thai economy," he said.

Changan's commitment to Thailand is part of its global "Vast Ocean" strategy, which positions the country as its primary export hub outside China.

The company is expanding production at its Rayong plant, targeting 200,000 units a year to support a sustainable product lineup.

Mr Wu said the company's corporate philosophy remains anchored to its strategy of "Thailand, for Thailand".

By absorbing Thai Tier 1 suppliers into its structure, Changan is strengthening local supply chains and ensuring its operations contribute directly to the Thai economy, he noted.

UNCERTAIN OUTLOOK

Despite these assurances, Thai industry leaders remain cautious.

The FTI set a 2026 production target of 1.5 million units, comprising 950,000 units for export and 550,000 units for the domestic market.

However, Surapong Paisitpatanapong, advisor and spokesman for the FTI's Automotive Industry Club, warned that the export target may be missed due to geopolitical tensions, particularly conflicts in the Middle East.

The domestic market also faces challenges. Pickups, once Thailand's product champion, have registered declining sales for years.

Mr Suwat said the segment needs more government support to lift demand, which would also benefit the 1,500 auto parts makers under the FTI.

"The pickup segment used to generate significant economic value, but sales have been weak for a long time," he said.

"Without new measures, both manufacturers and suppliers will suffer."