EV import tax plan tipped to trigger year-end booking rush

Thailand’s planned increase in excise tax on fully imported electric vehicles could trigger a surge in purchases at the year-end Motor Expo as buyers rush to secure current prices before the proposed new rate takes effect in 2027, according to the automotive industry.

The Finance Ministry is preparing to seek Cabinet approval within two weeks for an increase in excise tax on completely built-up electric vehicles with no Thai-made components, according to a ministry source.

The source said vehicles in the targeted category are currently subject to a rate of about 10%, which would rise to at least 30% under the proposal.

The measure is expected to take effect from January 1, 2027, although it has yet to receive Cabinet approval.

The government intends the higher rate to support carmakers that have invested in production plants and supply chains in Thailand while encouraging brands that still rely on imports to establish manufacturing operations in the country.

Imported EV prices set to rise

The Finance Ministry source said the higher tax would make fully imported EVs more expensive from next year.

A vehicle priced at THB1 million currently subject to a 10% rate would incur about THB100,000 in excise tax. Raising the rate to 30% or more could increase the tax burden by at least THB200,000, depending on the final structure.

The prospect of higher prices is expected to encourage customers considering imported EVs to bring forward their purchases before the end of this year.

Locally manufactured EVs meeting the relevant conditions would not be targeted by the proposed increase, the source said.

Thailand’s EV strategy began several years ago with the EV 3.0 and EV 3.5 programmes, which sought to attract manufacturers and establish the country as a regional EV production hub.

The incentives have attracted several Chinese carmakers to build plants in Thailand for domestic sales and exports to markets including Malaysia, Japan and Australia.

The government now sees the next stage as encouraging greater domestic production and local sourcing rather than relying heavily on imports.

Three-tier tax structure proposed

Another key element of the planned reform is a revision of the way local content is measured.

The new approach would give greater weight to high-technology components manufactured in Thailand rather than allowing factors such as profits, labour and electricity costs to account for a large share of domestic value.

The proposed tax structure would broadly divide manufacturers into three groups.

The lowest rates would apply to manufacturers with local plants and high levels of domestic content.

An intermediate rate would apply to companies producing vehicles in Thailand but still relying heavily on imported components.

The highest rate would be imposed on completely built-up vehicles imported by companies without local manufacturing operations.

The government’s broader automotive tax strategy is also moving towards carbon dioxide emissions and domestic economic value rather than setting rates solely according to powertrain technology.

That approach would allow cleaner technologies, including battery electric vehicles, range-extended electric vehicles and hybrids, to receive lower rates depending on their emissions and contribution to the Thai economy.

FTI warns against transition period

Suwat Supakarndechakul, Vice Chairman of the Federation of Thai Industries and Chairman of its Automotive Industry Club, said the industry had been aware of plans for a tax increase on imported EVs.

However, he said the level of the new rate and the conditions surrounding its implementation would be critical.

Suwat argued that a tax restructuring of this nature should not include a grace period because advance notice could encourage importers to build up stocks and consumers to bring purchases forward, distorting the market.

Once buyers know imported EV prices are about to rise, he said, they are likely to accelerate purchases before the new rate takes effect.

This could create a “golden period” for imported vehicles at the end of 2026 but leave demand substantially weaker in 2027, potentially hurting manufacturers that have already invested in domestic assembly plants.

Motor Expo bookings tipped to surge

Suwat expects the year-end Motor Expo to provide a clear indication of the impact.

He predicted a sharp rise in EV bookings as consumers seek to buy imported models before the planned tax increase.

The rush could pull demand forward from next year, creating a more difficult market once the new tax structure begins.

Suwat also warned that some EV importers with weak sales could eventually withdraw from Thailand if higher taxes undermine their business models.

Such exits could create longer-term problems for owners requiring servicing, spare parts or warranty support.

He therefore urged consumers to consider the long-term stability of vehicle brands and whether manufacturers have established production operations in Thailand.

Industry calls for more support for pick-ups

The automotive industry has also urged the government to introduce measures supporting pick-up sales.

Suwat said pick-ups play an important role in the grassroots economy and are widely used by lower-income households, farmers and small businesses.

He argued that recent government measures had stimulated EV demand more strongly, benefiting buyers with greater purchasing power, while the pick-up segment remained weak.

Some potential pick-up buyers seeking lower running costs were also switching to EVs, adding further pressure to the segment.

Local-content measures remain key concern

The industry also wants the government to move faster on other measures intended to promote the use of Thai-made parts.

Suwat said the EV policy framework contained several elements, with higher taxation of imports representing only one part of the package.

Other measures are intended to stimulate local-content use and strengthen domestic suppliers.

If the higher import tax is introduced before those measures take effect, he argued, the policy would not yet directly address the central challenge of strengthening Thailand’s automotive supply chain.

The National EV Policy Committee has already endorsed the principle that future tax rates should reflect investment, domestic production, local sourcing and employment created in Thailand.

The Finance Ministry source rejected suggestions that the proposed tax increase was designed to favour Japanese manufacturers, saying it formed part of a longer-term roadmap covering investment attraction, supply-chain development, local-content requirements and protection of the domestic production base.

The government’s stated goal is to preserve Thailand’s position as a major regional automotive manufacturing hub while encouraging manufacturers to create more economic value inside the country.

Source: Krungthep Turakij