It has been more than half a century since Thailand started developing its automotive industry to decrease its dependency on vehicle importation. Since those early days, Thailand’s performance in this industry has improved significantly

over time with the country’s automotive manufacturing reaching 1 million units for the first time in 2008. More recently, for the period 2016 to 2017, Thailand’s automotive production rose by 2.28% to 1.94 million units. Out of four categories in this sector, it is the production of light commercial vehicles that have dominated this incredible growth with a 59.28% share of Thailand’s automotive production, followed in descending order by passenger vehicles, heavy trucks, and buses and coaches. 

On the back of these impressive figures, Thailand is now ranked as the 12th largest motor vehicle producer and 5th largest light commercial vehicle producer in the world, as well as the largest motor vehicle producer in ASEAN. The country has also established itself as a production hub for 18 car, 9 motorcycle, and more than 700 auto parts companies. Almost all of the leading Japanese automotive companies as well as many more from the US, Europe, and China have established production plants in Thailand. Some have also chosen to base their R&D hub and regional head office in Thailand as well. 

Further underlining the growth of the automotive industry in Thailand, the country has also developed into a major automotive export hub with key trade partners for the industry that include Australia, the Philippines, Japan, Indonesia, and Malaysia. Thailand is also now labeled the automotive hub of ASEAN which is the 5th largest vehicle market globally. As a consequence, the automotive industry is now one of the main contributors to Thailand’s GDP, accounting for approximately 12%. The recent success in the industry has been largely attributed to the demand for vehicles in ASEAN. In 2017, sales of new vehicle in ASEAN reached 3,297,197 units, an increase of 4.02% from 2016. Compared within the region, Thailand itself has the highest year-to-date growth for the domestic sales of new vehicles at 13.40%.

Located as it is at the center of mainland Southeast Asia and the Greater Mekong sub-region, Thailand has been quick to exploit its geographically advantageous position in recent times. Already one of Southeast Asia’s top performers in the logistics field, there is a growing belief that Thailand will become the key logistics hub for companies setting up manufacturing bases in Indochina. Having a production hub in Thailand makes it easier for manufacturers to distribute their products and parts all over the region, a strategical advantage that is further enhanced by the benefits afforded through Thailand’s free trade agreements.

Building on its strength, Thailand still aims to improve its automotive manufacturing capability further and take the industry to the next level. It is forecast that Thailand will be able to increase its automotive production to 3.5 million units in 2020, representing a targeted growth of 80% from 2017. Looking further forward, the country has also identified next-generation automotive as one of the 10 S-curves industries that will enhance its international competitiveness. In order to develop this industry, it is essential to take into account the direction in which the global market is moving.

Nowadays, the global trend in automotive industry manufacturing and sales is becoming increasingly geared toward Electric Vehicle (EV), Hybrid Electric Vehicle (HEV), Plug-in Hybrid Electric Vehicle (PHEV), and Battery Electric Vehicle (BEV) due to the rise of environmental awareness, worries over fuel supplies, and concerns about air pollution issues. Bloomberg NEF has forecast that sales of EVs are set to rise from a record 1.10 million units worldwide in 2017 to 11 million units in 2025 before surging to 30 million units in 2030. A study by the International Energy Agency also shows that EVs are expected to account for 35% of all vehicles by 2040.  With the current strength of the industry buoyed by government support, it is predicted that the Thai automotive industry is ideally positioned to not only meet domestic demand for next-generation automotive production but also make a significant contribution to the global market. 

While HEVs were first launched in Thailand in 2009, local usage of both HEV and PHEV remains limited. One of the major challenges faced by the industry is the perceived inconvenience and concerns over battery insufficiency for HEV, PHEV, and EV. In addressing this and other related challenges, the Ministry of Energy has launched its ‘Energy 4.0’ initiative, which, among other things, includes supportive policy with regard to EVs and EV charging stations. The new government policy includes measures aimed at improving the infrastructure for EV usage and establishing 690 EV charging stations by 2036. It is also the government’s stated aim to increase EV usage in public transportation, including plans to change 22,000 motorized scooter rickshaws, known as TukTuks, to eTukTuks by 2022. This bold move represents an excellent opportunity to grow EV production and usage with strong support from the public sector.

To support reduced CO2 emissions, the Thai government offers tax benefits to manufacturers of vehicles that emit low levels of CO2. The Ministry of Finance revised vehicle excise tax in June 2017, reducing the excise tax for HEV and PHEV by 50%. For EVs, the benefits are even greater, with the lowest excise tax for any type of vehicle at just 2%. The Thailand Board of Investment (BOI) has also introduced both tax and non-tax incentives for electric vehicle manufacturers. For producers of HEVs, PHEVs, BEVs, and electric buses, the BOI is offering an exemption of import duty on necessary machinery. With regard to charging stations, the BOI is also offering 5 years of corporate income tax exemption. It is expected that the Thai government  policies and BOI investment incentives will not only increase the ease of doing business for foreign investors but will also play a major role in shifting the interest of both producers and consumers toward vehicles with lower CO2 emissions due to the increasingly attractive price competitiveness of EVs compared to traditional gas-fueled cars.