An independent economist has called on the Thai government to introduce measures to encourage Japanese investors, particularly automakers, to remain in Thailand, even if this requires tax reductions.

Japanese automakers also need to reduce vehicle prices to compete with Chinese electric vehicles (EVs), said Aat, a lecturer at Rangsit University's Faculty of Economics. He also said the Thai government should require Chinese automakers seeking to expand their EV businesses in Thailand to help develop local suppliers and integrate them into China's EV industry, including through training and skills development for Thai workers.

Thailand's automotive supply chain has been unable to establish effective links with China's EV industry because the country has yet to catch up in technology and innovation, Aat said. Thai companies, however, have experience supplying Japan's internal combustion engine (ICE) industry because Japanese companies have been involved in developing local workers and suppliers.

"I think the government's policy needs to be clear about which direction we are headed. Will we focus on EVs over the next 10 years, or will we continue to prioritise the ICE vehicles?" he asked.

Aat questioned whether the ICE vehicle market could continue to grow even if the Thai government offered incentives such as eliminating taxes on Japanese automakers. The market is shifting towards EVs because their operating costs are lower than those of ICE vehicles. An ICE vehicle driver may spend around THB 10,000 (US$ 305) per month on fuel, while the operating cost of an EV could be around THB 2,000, he said.

Indonesia

There are reports that Toyota may shift investment from Thailand to Indonesia, which continues to emphasise ICE vehicles partly because its domestic oil resources help keep fuel prices lower than in Thailand. Indonesia also has a larger automotive market than Thailand.

"Even if Japanese automakers receive tax incentives and the tax rate is reduced to zero, if they sell their vehicles at the same prices many consumers will still opt for Chinese EVs because they are considerably cheaper in terms of energy costs," Aat said.

If Thailand wants to ensure that Japan's ICE automotive sector remains viable in the country, government support alone will not be sufficient, he said. Thailand should also ask Japanese automakers to reduce vehicle prices so they can compete with Chinese EVs.

Government requirements

Regarding requirements for Chinese automakers to help develop the local supply chain, Aat said one possible condition could be the development of 100-200 Thai suppliers within one to two years.

The initiative should also include training Thai workers for employment in China's automotive industry and cooperation with Thai universities. This could include allowing third- and fourth-year university students studying automotive-related subjects to undertake training at Chinese companies, Aat said.

"I think China would be willing to listen to such conditions because the Thai automotive market is growing rapidly," he said.

Aat said he supports the "Made in Thailand" policy, which promotes the use of locally sourced raw materials. However, products should be certified as Thai-made to prevent fraudulent claims of Thai origin.

An effective traceability system is required to prevent such fraudulent designations, he added.