Thai car exports to drop below 1 million as Australia tightens rules, says KResearch

Kasikorn Research Centre (KResearch) predicts that Thailand’s overall car exports in 2025 will drop to just 900,000 units — a level below the usual benchmark of over one million units. The main reason is Australia’s new import standards for vehicles, which have heavily affected Thailand’s top export market that accounts for 28% of its total car exports.

The impact of these new regulations has been clearly reflected in trade figures. During the first seven months of 2025, the volume of Thai car exports to Australia fell by 16%, while the export value declined by 17.3% year-on-year. KResearch expects the downward trend to continue until the end of the year.

Australia tightens rules: NVES and AEB reshape the market

Australia began enforcing stricter import standards for new vehicles early this year under two key frameworks that are transforming the market:

• New Vehicle Efficiency Standard (NVES): This regulation limits the amount of CO₂ emissions per kilometre for new cars. Starting from July 2025, penalties will be applied to vehicles exceeding the limit. The initial thresholds for this year are set at 141 grams of CO₂ per kilometre for passenger cars and 210 grams for pickups and passenger pickup vehicles (PPVs).
   
• Safety standards: All newly imported vehicles must be equipped with Automatic Emergency Braking (AEB) systems that meet Australian standards. This rule has been mandatory since March 1, 2025.
   

The tightening of CO₂ standards will intensify in the coming years, with 2028 targets expected to drop dramatically to 68 grams per kilometre for passenger cars and 122 grams for pickups and PPVs. This means only plug-in hybrids (PHEVs) and battery electric vehicles (BEVs) are likely to comply.

As a result, demand for hybrid (HEV) and plug-in hybrid (PHEV) vehicles in Australia has surged — imports of these models increased by 34.7% year-on-year during the first seven months of 2025.

Thailand loses market share: lack of PHEV and non-compliant HEVs

Despite the growing demand for HEVs and PHEVs in Australia, Thailand has not benefited. Exports of Thai-produced HEV and PHEV models to Australia fell 15.1% year-on-year due to:

• Lack of PHEV production: Thailand’s manufacturing base does not yet produce plug-in hybrids for export to the Australian market.
   
• Non-compliant HEV models: Some hybrid models made in Thailand fail to meet Australia’s new, stricter CO₂ emission standards.
   

These factors have caused Thailand’s market share in Australia to shrink — down 2% for passenger cars and 5% for commercial vehicles. 

This indicates that Japanese automakers, the main investors in Thailand’s car industry, are struggling to adapt. Meanwhile, Australia is increasingly importing HEVs and PHEVs from China, South Korea, the United States and South Africa.

Long-term challenge: Thailand must upgrade to high-tech production base

Looking ahead, the key challenge for Thailand is whether automakers will choose to use the country as a production hub for advanced HEV and PHEV models that meet Australia’s tougher standards. The decision will depend on several factors:

• Fiercer competition: Chinese automakers are rapidly expanding their presence in Australia.
   
• Maintaining existing production bases: Japanese automakers may prioritise maintaining or expanding output in their home countries, especially after the US — their key export market — raised import tariffs on vehicles.
   
• Alternative production bases: Automakers may shift to other locations with stronger economies of scale or more favourable trade deals, such as South Africa, which has a free trade agreement (FTA) with the European Union (EU) — another major market demanding high-tech vehicles.
   

Therefore, Thailand urgently needs to accelerate investment in new-generation car manufacturing to meet Australia’s tightening CO₂ standards. Failure to do so could erode Thailand’s global standing as a major automotive production and export hub.