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Thailand is one of the leading countries in Southeast Asia when it comes to electric vehicle (EV) adoption. According to the nation’s Industry Ministry, Thailand’s EV sector accounted for about 78% of all EV use in ASEAN in the first quarter of 2023. It also led the region’s production of EVs last year with around 72,000 vehicles.
However, the government has pledged to continue supporting the production of internal combustion engine (ICE) vehicles. Thailand’s Prime Minister Srettha Thavisin stated that he wants the nation to serve as a “last centre” of ICE production until the usage of the technology completely diminishes. More precisely, he reassured that Thailand would continue to support the manufacturing of ICE vehicles for the next 10-15 years.
Thailand’s automobile industry has been dominated by motorcycles, pickup trucks, and passenger cars based on ICE. However, the nation has begun making a transition to electric vehicles (EVs) in a bid to reduce carbon emissions.
Thailand wants to reach carbon neutrality by 2050 and net zero GHG (Greenhouse gases) emissions by 2065. Therefore, fostering EV adoption in the country is an important part of the transition and the kingdom has implemented several plans to support the net zero goals. Amongst them are the 30@30 policy that aims to transition 30% of its auto production to EVs by 2030 and the EV3.5 measures to boost Thailand’s ambitions to create a global electric vehicle hub through 2027.
Besides, the Thai cabinet has also undertaken measures to boost domestic manufacturing of EVs, which includes import duty exemption on major electrical components between 2022 and 2025.
The nation has over 1000 domestic auto parts and accessories players, but for automobiles, Thailand mainly acts as the production hub for top Japanese, European, and US carmakers. Thailand’s Commerce Ministry suggests that the automobile and vehicle parts industry in the nation was worth about $37.6 bn in 2022, with the auto accessories and parts contributing $15.6 bn.
The Middle East, Europe, North America, Central America, and South America are the major export destinations for Thailand’s automotive sector.
Transition to EVs with negative effects on the Thai automotive industry?
Industry analysts opine that a dual policy to promote both battery electric vehicles (BEVs) and ICE vehicles makes sense as it takes substantial time to shift towards EVs, and the funding requirement for it could be met by ICE vehicle production and exports. Moreover, Thailand is the major production and export hub for pick-up trucks, which need to remain as ICE vehicles due to battery storage limitations in electric vehicles.
According to a local newspaper, the Thai National Shippers’ Council (TNSC) supports the government’s stance towards a buoyant ICE automotive industry. TNSC chairman Chaichan Chareonsuk said that the value addition of EVs to local manufacturers is only 34%, while for ICE vehicles the value addition of 53%.
“A sudden shift towards an EV policy might heavily impact operators and the workforce in the automotive industry. Thai manufacturers of ICE vehicles are projected to have their market share dip to 47% from 67% once the transition occurs to EVs,” said Chaichan.
Furthermore, notwithstanding the government efforts towards promoting EV vehicles, the adoption rate has been low, and the customers still favour ICE vehicles in Thailand. Between January to September 2023, Thailand’s total vehicle sales were 500,942 units, wherein the EV share was 10.05%. While the number depicted a major growth from 9,729 EVs sold in the same period last year, the market share compared to ICE vehicles remains quite low. Moreover, the price gap between even the cheapest EV car model and the cheapest ICE car model is massive. The cheapest EV car model costs about $22,800 (post-subsidy), while ICE car models are available starting from about $9,000.
However, Thailand holds a favourable position to drive the future of the EV industry, opines a report by consulting firm Arthur D Little. “As the government sets a clear agenda to achieve its ZEV target of 1.123 million ZEVs and carbon neutrality target by 2050, it has provided attractive incentives for the supply side, the demand side, and the EV charging infrastructure.”
But, to reach its 30@30 goals, Thailand still has a long way to go. “Based on the current market situation and expected future movements, we believe that the Thai government will most likely miss its 1.123 million zero-emission vehicles target by 2030,” says Hirotaka Uchida, Head of Arthur D. Little Thailand, Automotive and Manufacturing in Southeast Asia Pacific.
