Thailand has announced plans to offer tax incentives for the production of plug-in hybrid vehicles (PHEVs). If approved, the changes will take effect in 2026.

Deputy finance minister Paopoom Rojanasakul made the announcement on Monday, stating that the new tax system would be based on a vehicle's electric travel range per battery charge, with lower taxes for those offering longer ranges.

Minister Paopoom explained that the proposal would be submitted to the cabinet for consideration by April. It aims to promote the production of more eco-friendly vehicles and strengthen the domestic automotive industry.

Under the plan, tax rates for PHEVs would be linked to their electric travel range per charge, with vehicles offering longer ranges qualifying for lower taxes. This approach differs from existing electric vehicle (EV) tax structures, which focus on carbon emissions, and is intended to encourage the adoption and production of PHEVs specifically. The current restriction on fuel tank size for PHEVs would also be lifted, providing manufacturers with greater flexibility.

Thailand is the largest automotive production hub in Southeast Asia and a key export centre for some of the world's leading automakers, including Toyota and Honda. However, the industry is currently experiencing a significant slowdown.

The Thai government hopes that these incentives will not only help revitalise the automotive sector but also contribute to the transition towards a more sustainable transportation model, reducing dependence on fossil fuels.

Thailand's automotive industry, which accounts for 10% of the nation's GDP, has faced a slump, with production falling by 10% last year to a four-year low, alongside declines in domestic sales (26%) and exports (8.8%). The sector also faces growing competition from Chinese EV manufacturers such as BYD and Great Wall Motors, who have made substantial investments in Thai production facilities. These tax incentives are designed to support local manufacturing and the shift towards electrified vehicles, reinforcing Thailand's position as a key player in the regional automotive market.