The Federation of Thai Industries (FTI) has expressed concern that the expiry of Thailand's electric vehicle (EV) incentive programme in 2027 could leave the country vulnerable to increased imports of Chinese electric vehicles and weaken domestic automotive supply chains.

Thailand has implemented a series of policies aimed at attracting investment from global automakers and expanding electric vehicle manufacturing. Central to this strategy is the EV3.5 programme, which runs from 2024 to 2027 and offers tax reductions and direct subsidies to automakers in exchange for investments in battery electric vehicle (BEV) assembly facilities in Thailand.

The programme was introduced to encourage local production rather than imports. Under the scheme, automakers receiving incentives are required to assemble BEVs locally, and current regulations require companies to produce two or three vehicles in Thailand for every vehicle imported.

The policy has attracted foreign investment, particularly from Chinese automakers, which have invested billions of baht in new assembly plants and production lines. The programme has also contributed to growth in electric passenger vehicle sales, supported by subsidised retail prices.

However, industry representatives are increasingly focused on developments following the programme's expiry at the end of 2027.

Suwat Supakandechakul, the newly appointed chairman of the FTI's Automotive Industry Club, stated that the government needs to prepare additional measures to support the sector once the incentive programme concludes.

Without incentives, automakers may choose to import BEVs rather than manufacture them locally.

"Chinese carmakers have already been importing vehicles from China and are expected to increase volume after 2027, as operating costs in Thailand may be higher than imports that benefit from the Asean-China Free Trade Agreement, which allows a 0% import duty," Mr. Suwat said.

The Automotive Industry Club warned that, once subsidy support and local production obligations expire, manufacturers could reassess the economic viability of operating factories in Thailand. Industry estimates indicate that producing an electric vehicle in Thailand currently costs approximately 30% to 40% more than manufacturing the same vehicle in China.

The Asean-China Free Trade Agreement allows Chinese-made EVs to enter Thailand with zero import duty. Industry representatives believe this could encourage automakers to reduce local production and increase imports if additional policy support is not introduced. The FTI warned that such a shift could affect Thailand's role in regional EV manufacturing and potentially increase the country's reliance on imported vehicles.

Impact on local suppliers

The potential reduction in local vehicle production has raised concerns regarding the future of Thailand's automotive supply chain.

For decades, domestic parts suppliers have relied heavily on the production of internal combustion engine vehicles, particularly pickup trucks. However, the transition towards electric mobility has already created challenges for many suppliers.

The Automotive Industry Club highlighted the prolonged downturn in pickup truck sales, driven by tighter bank lending policies, high household debt levels, and changing consumer preferences. Annual pickup truck sales have fallen. The decline has affected local parts manufacturers that depend on pickup truck production.

Historically, pickup trucks accounted for around 60% of Thailand's total vehicle production, while passenger vehicles represented approximately 40%. That balance has now reversed, with passenger vehicles accounting for roughly 60% of production.

Industry representatives noted that much of the growth in passenger vehicle output has been driven by Chinese automakers operating BEV production facilities in Thailand, while internal combustion engine pickup truck production continues to be affected by the global shift towards electrification.

Industry groups have warned that an increase in imported EVs after 2027 could further reduce demand for locally produced components, placing additional pressure on parts suppliers that are already adapting to changing market conditions. Automotive associations have urged the government to introduce measures that preserve domestic vehicle production and support the broader supply chain.

Proposed policy responses

The FTI has urged the government to consider additional policies to sustain domestic manufacturing and encourage EV adoption after the EV3.5 programme expires. One proposal is the introduction of a vehicle trade-in programme aimed at encouraging consumers to replace older vehicles with newer electric models while supporting related sectors such as automotive parts and electronics.

However, a Finance Ministry official, speaking anonymously, stated that the proposal may be shelved because of unresolved issues. These include determining the age of eligible vehicles, assessing the value of used vehicles, and managing the disposal or export of vehicles traded into the programme.

Industry representatives have also suggested that the government explore measures to support domestic manufacturing, including encouraging greater use of locally produced components and supporting the development of Thailand's EV ecosystem.

Proposals discussed within the industry include expanding charging infrastructure, investing in battery recycling facilities, supporting research and development activities, and creating conditions that encourage long-term manufacturing investment.

According to industry representatives, Thailand's automotive production sector after 2027 will be influenced by the policies implemented following the expiry of the EV3.5 programme. Industry representatives stated that the programme has attracted investment and increased EV adoption, but that future development of the sector will depend on policies affecting local production, supply chains, and the competitiveness of manufacturing operations during the transition towards electric mobility.