Thailand is preparing measures to strengthen domestic electric vehicle (EV) manufacturing, increase local component sourcing and accelerate the transition towards clean-energy vehicles.

The plans include higher excise taxes on imported EVs, local-content requirements and subsidies for electric motorcycles and vehicle replacement programmes.

Finance Ministry Permanent Secretary Lavaron Sangsnit said a proposed third phase of EV promotion policies would make the use of genuinely Thai-made components a condition for qualifying for the lowest excise tax rate. The initiative aims to develop Thailand into a regional EV manufacturing and export base while supporting Tier 1, Tier 2 and Tier 3 domestic suppliers.

Thailand introduces three-tier EV excise tax structure

Thailand's EV 3.0 and EV 3.5 incentive schemes attracted eight Chinese manufacturers through subsidies and investment incentives. However, relatively low import taxes allowed some companies to continue importing completely built-up (CBU) EVs instead of establishing local production.

The Cabinet approved an increase in the excise tax on imported EVs to 35% from January 1st 2027, replacing the existing rates of 10% for battery electric vehicles (BEVs) and 15% for range-extended electric vehicles (REEVs). As the Excise Department calculates tax on vehicle values inclusive of import duties and VAT, the effective burden could reach 49% of the vehicle price.

Lavaron said the increase was intended to make imported EVs less competitive and encourage local manufacturing. Approved on November 3rd 2026, the measure forms part of the department's planned policy sequence rather than a response to pressure from particular manufacturers or countries.

The government expects the increase to attract further investment. AAS Auto Service has requested a meeting with the finance minister to discuss establishing a factory, while another company was preparing to approach the Excise Department. Neither represents a confirmed investment. Lavaron also clarified that the policy was not intended to appease Japanese carmakers.

Local-content requirements and additional component incentives

The proposed third phase would establish three excise tax levels: 10% for manufacturers meeting Made in Thailand (MIT) requirements, approximately 15% or 20% for companies manufacturing locally but failing to meet the required component-sourcing threshold, and 35% for fully imported EVs.

The Excise Department is reviewing the local-content calculation method. Existing Customs Department rules based on World Trade Organization (WTO) criteria include costs such as profits, water and electricity, potentially producing domestic-content figures of 20% to 40% despite limited local component manufacturing.

Under the proposed MIT framework, only identifiable components genuinely manufactured in Thailand, such as seats, doors, glass and tyres, would count towards local content. Lavaron cited 40% as a possible threshold, although this remains unfinalised.

The department is discussing the criteria with the Federation of Thai Industries (FTI), which would assist manufacturers with sourcing plans and component lists. Both new and existing factories would receive approximately three years to prepare, with implementation expected around 2030. Qualifying manufacturers would pay 10% excise tax, while those below the threshold could face 15% or 20%. Non-compliant manufacturers would be subject to 35%.

Lavaron said the objective was to strengthen Thailand's manufacturing base and domestic supply chain rather than primarily increase tax revenue. Local production is also expected to improve aftersales support and spare-parts availability, potentially helping standardise EV insurance arrangements and premiums.

Separately, the department is considering incentives for high-value EV components, particularly batteries, whose technology and production many automakers retain within their overseas parent companies. Deputy Director-General Ratchada Vanichakorn said attracting battery investment remained challenging. Proposed changes could introduce two additional tax levels, including a rate of around 10% alongside the existing 2% rate for vehicles meeting strategic component requirements, such as locally produced batteries. The 35% import tax has been approved, but these additional incentives and local-content rules remain under consideration.

THB 12 billion proposed for clean-energy vehicle subsidies

The Excise Department is preparing two schemes requiring THB 12 billion (US$ 357 million), with THB 6 billion allocated to each. Funding would come from the latter THB 200 billion tranche of the emergency energy-transition loan decree, part of the broader THB 400 billion borrowing framework.

Director-General Pornchai Thiraveja said the proposals cover an old-vehicle trade-in programme and subsidies for domestically manufactured electric motorcycles. Both aim to reduce PM2.5 pollution and carbon emissions.

The proposals must pass the relevant screening subcommittee, receive approval from the National Electric Vehicle Policy Committee (EV Board) and then be submitted to the Cabinet. The department is also preparing the disbursement systems and supporting legal provisions.

Old vehicle trade-in scheme

The first THB 6 billion proposal aims to replace approximately 150,000 ageing vehicles with new pickups running on B20 biodiesel or electric power. It would cover owners of older four-wheel vehicles, including saloons, vans and pickups. Proposed eligibility conditions include pickups aged at least 15 years, registered before 2012, operational, not wrecked, with taxes fully paid and no outstanding obligations.

Old vehicles must be deregistered, permanently withdrawn from use and dismantled at licensed Thai recycling facilities, including those registered under code 105. Owners would receive the market value of scrap metal and reusable parts.

Eligible replacements could include electric pickups, B20-compatible pickups, passenger pickups and multi-purpose vehicles. Lavaron said the Multi Pathway approach recognised that commercial vehicles could not all transition directly to electric power. B20-compatible models would therefore also qualify as part of the clean-energy transition.

The preliminary subsidy is approximately THB 40,000 per vehicle. Participants could also receive manufacturer discounts and proceeds from scrapping their old vehicles. Government Savings Bank and private finance companies are expected to support funding and instalment loans, including proposed loans at annual interest rates of no more than 5%. Loan guarantees from the Thai Credit Guarantee are also being considered.

Lavaron cited Thailand's 8.17 million vehicles aged between 10 and 20 years or older, including polluting diesel pickups, alongside declining pickup sales caused partly by financing difficulties. Replacing older vehicles could provide another 15 years of service while reducing maintenance costs. The ministry is coordinating with dismantling facilities capable of processing up to 50,000 vehicles annually.

Electric motorcycle subsidies and wider transition plans

The second THB 6 billion proposal would subsidise purchases of electric motorcycles manufactured in Thailand, initially covering hundreds of thousands of units. Buyers would not need to surrender an existing vehicle, and subsequent resale or ownership transfers would be permitted. Financial institutions and private finance companies would also provide instalment financing. The department is separately preparing transition proposals for lorries and public transport vehicles, including buses, taxis and vans, although their funding and subsidy conditions remain unspecified.

Lavaron said the projects were being prepared for submission following the screening body's September 30th 2026 deadline. Pornchai added that tax measures and financial support would form part of broader clean-energy initiatives, alongside a public solar programme that opened for registration on October 27th 2026.

The government is therefore combining higher import taxes, domestic manufacturing incentives, local-content requirements and vehicle subsidies. While the 35% excise tax has received Cabinet approval, the remaining proposals are subject to further consideration and approval.