Written by / Zhang Ou
Edited / Tu Yanping
Design / Shi Yuchao
Source/Bangkok Post
From a central budget allocation of 3 billion baht (580 million yuan) in fiscal year 2022 to an increase of 40 billion baht (7.7 billion yuan) in fiscal years 2023-2025 – The Thai Cabinet approved a new incentive policy for electric vehicles in mid-February 2022, driving the new economy and officially kicking off thai electrification.
The government had set a target of 30% of total vehicle manufacturing by 2030, but with the rapid growth of electric vehicles in many countries, especially in Europe, the target was raised to 50% in March 2021.
The Thai government's ambition is to achieve zero emissions for all types of vehicles, eventually becoming a regional manufacturing center for cars and their parts, cementing its title of "Detroit in Asia".
Borrowing supports the economic recovery
Thai Finance Minister Arkhom Termpittayapaisith said that while the new EV excise tax structure will reduce state revenues, the promotion of electrification will create new investments, jobs and demand, all of which will bring greater returns to the country in the form of income tax revenues. The government must therefore assume responsibility and burden at the initial stage.
Over the past two years, to mitigate the impact of covid-19, the Thai government has borrowed 1.5 trillion baht (289.8 billion yuan) under an emergency decree, causing public debt to soar to 9.64 trillion baht (1.86 trillion yuan), or 59.6% of GDP as of December 2021.
In September 2021, the government raised the public debt ceiling from 60% of GDP to 70% to accommodate further borrowing in the future and support the economic recovery.
The Thai government expects this electrification revolution to be a repeat of the wave of automotive industry development 30 years ago. In the late 1980s and early 1990s, Thailand's automotive industry cluster grew rapidly, making Thailand an export center for pickup trucks and adding a lot of revenue to the national treasury.
At the 2021 Thailand International Automobile Expo in Nonthaburi province in December 2021, electric vehicles are being charged. (Photo: Pattarapong Chatpattarasill)
4-year incentive plan: from indiscriminate subsidies to support local manufacturing
In order to further promote domestic electric vehicle manufacturing between 2022 and 2025, according to the latest incentive plan, each vehicle will be subsidized by 70,000-150,000 baht (RMB 13,525-28,983 yuan), depending on the type and model of the vehicle.
Passenger cars with a battery capacity of 10-30 kWh can receive a subsidy of 70,000 baht (RMB 13,525) per vehicle; CKD (fully assembled) and CBU (fully assembled) with a battery capacity of more than 30 kWh can receive a subsidy of 150,000 baht (RMB 28,983) per car; CKD pickups with a battery capacity of more than 30 kWh can also receive a subsidy of 150,000 baht per vehicle.
In addition, electric motorcycles priced below 150,000 baht, whether it is CKD or CBU models, can receive a subsidy of 18,000 baht (RMB 3,478).
In terms of reducing GST and import taxes on CKD and CBU vehicles, for pure electric vehicles with a retail price of no more than 2 million baht (RMB 386,000), a tariff discount of up to 40% can be enjoyed.
For electric vehicles with a battery capacity of more than 30 kWh and a retail price of 2-7 million baht (RMB 386,000-1.35 million), a further 20% tariff discount can be enjoyed. The excise tax on pure electric vehicles has also been reduced from 8% to 2%.
Government spokesman Thanakorn Wangboonkongchana said the four-year plan to promote electric vehicles would be divided into two parts:
In 2022-2024, promote wider and faster use of electric vehicles by providing tax breaks and subsidies for imported and locally produced electric vehicles and motorcycles; in 2024-2025, focus on domestically produced electric vehicles, while gradually eliminating preferential policies for imported cars.
This approach ensures that automakers from all over the world can benefit equally in this emerging electric vehicle market. Many countries, including Germany, China and Israel, have set up electric vehicle battery factories in Thailand.
Previously, many automakers had feared that Chinese automakers would hoard advantages in the industry as China and Thailand signed a free trade agreement with zero import tariffs on general auto parts from China.
Steady growth in electric vehicle sales from 2016 to 2020
Hybrids are currently more popular
Pimchatr Ekkachan, a senior economist at krungthai Compass, a research firm, told The Bangkok Post that despite these incentives, Thailand's auto industry could take at least a decade to be ready to effectively produce and sell electric vehicles.
"Thailand's transition from a regional hub for the production of internal combustion engine vehicles to electric vehicles is undoubtedly a very challenging thing, because the existing supply chain and infrastructure are tailored to produce the bodies and parts of fuel vehicles," she said. ”
According to the Federation of Thai Industries, the total number of newly registered pure electric vehicles in Thailand in 2021 was 1958, an increase of 53% over 2020. In the passenger car and pickup segment alone, there are 34,338 hybrid vehicles and 7,060 plug-in hybrids.
For now, most buyers are still leaning toward hybrids because Thailand lacks adequate infrastructure for electric vehicles, especially with a shortage of charging stations.
Narong Sritalayon, general manager of Great Wall Motor (Thailand), said that thanks to the government's increased promotion of electric vehicles, as many as 94,000 electric vehicles of various types are expected to be sold in the market, of which 20% will be pure electric vehicles.
Krisda Utamote, president of the Thai Electric Vehicle Alliance (EVAT), said: "Subsidies for electric vehicles and lower excise taxes will enable more potential car buyers to opt for electric vehicles. ”
Growth of newly registered hybrid vehicles in Thailand in 2020-2021 (Source: Bangkok Post)
Concerns from inside and outside the industry
Dr. Sanan Angubolkul, chairman of the Thai Chamber of Commerce, believes that the government's latest incentive scheme has greatly helped to promote the adoption of electric vehicles, because electrification is a global trend and is listed as one of Thailand's S-curve industries.
But he also said: "I believe that Thailand has the ability to become a regional electric vehicle production center, and I also believe that the domestic and international electric vehicle market will continue to grow, but it should be noted that such incentive schemes may lead to a significant reduction in locally produced auto parts, and the resulting large-scale layoffs." ”
He advised the Thai government to speed up assistance and training for existing workers familiar with conventional internal combustion engine technology: "While electric vehicles and digitalization are global trends, Thailand should ensure the principle of self-sufficiency in development." Moreover, businesses that are the core strengths of the state, such as tourism, agriculture, food, bioeconomy and lifestyle, should not be ignored and also need continuous support. ”
Chaichan Chareonsuk, chairman of Thailand's National Consignment Commission, said the latest incentive scheme to promote the adoption and production of electric vehicles in Thailand is in line with global megatrends and can promote environmental protection. But a sharp and too rapid transition could have a negative impact on Thailand's existing automotive supply chain, which has been in operation for decades.
Mr. Changchaicha said: "Such a shift will not only affect the employment of the automotive industry in the country, but also affect the employment of the parts industry. ”
Sisdivachr Cheewarattanaporn, chairman of the Association of Travel Agents in Thailand, believes the government is somewhat "eccentric". The most vigorous tourism industry has only just begun to regain its footing after the worst crisis, so how the electric vehicle manufacturing industry and other sectors will reach the goal of distributing income to the provincial economy, especially in the micro sector, is simply unknown.
"The government should not forget tourism, which contributed almost 20% to GDP before the pandemic and is an important area of helping to reduce income inequality." Chivatanapu said. He believes that Thailand's economic confidence will still depend on tourism in the future, citing a survey of Thai Chinese businessmen, 90% of whom believe that without tourism, Thailand's economic recovery would not have happened.
Longer-term, more diverse policy support is needed
Katikar Tipayalai, an economist at Chulalongkorn University, believes that the government's EV subsidy policy addresses price concerns, but the incentive package expires in 2025 and is too short-lived.
If the government wants to build more domestic demand in the future, she said, it could take years for foreign automakers to seriously invest in Thailand. Around the world, electric vehicles are supported by long-term government privileges after purchasing electric vehicles, not just discounts on prices.
Norway, for example, has the highest penetration of electric vehicles in the world, and the country has been developing such vehicles since the 1970s. Norway was able to transform production so that electric vehicles have accounted for 100% of total production since 1990 and now account for 87% of the country's car use.
Measures in Norway to promote the use of electric vehicles include lower car purchase taxes, license plate taxes, annual car taxes and lower parking fees in public places. Electric cars can also use the same lane as public transport.
Germany is the leader in the EU's green deal, with the government offering 5-10 years of auto tax exemptions and $8,000-$10,000 in compensation for electric vehicles, including privileges such as free parking.
In China, according to the 2022 new energy vehicle subsidy plan, there is a moderate subsidy scheme of 4800-12600 yuan per vehicle, and there are different support measures in various regions, such as reducing parking fees, reducing charging fees at public charging stations and free tolls.
In the long run, in order to achieve the national target for the use of electric vehicles, Kadika suggested that the Thai government promote the production of electric vehicles for domestic use. Or, as in the United States, the first to specify the use of electric vehicles in government agencies or public transportation providers.
Thailand International Automobile Expo 2021 in Nonthaburi province on December 2, 2021 (Photo: Agence France-Presse)
Amorn Sapthaweekul, deputy chief executive of Energy Absolute, a Thai renewable energy company, believes that the EV incentive scheme is the first step in illustrating Thailand's potential to become a regional hub for electric vehicle production. Soon, electric vehicles are likely to become Thailand's main economic driver.
"These incentives are announcing to the Thai people and foreign investors that our electric vehicle development has reached a milestone," he said. Otherwise, automakers and buyers will still be skeptical of the government's eviction policy. Keeping the public informed of clear policy directions and concrete action plans is one of the government's main tasks. ”