Thailand faces structural shift in automotive sector amid rapid EV transition
Thailand, Southeast Asia’s leading automotive hub, is undergoing a profound transformation as the global shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs) accelerates.
In November 2025, Thailand made changes to its electric vehicle incentive policy in order to encourage exports and head off a supply glut at home, which could have an impact on the overall car market, the country’s Board of Investment said.
Every EV produced for export will now count as 1.5 units towards a manufacturer’s local production obligations, the agency said in a statement.Once a pillar of the economy, contributing more than 10% of GDP and employing over half a million workers, the sector now faces both short-term disruption and long-term opportunity.
EV 3.0 and EV 3.5 Explained
Under the government’s “30@30” vision, Thailand aims for 30% of domestic vehicle production to consist of EVs by 2030. To achieve this target, policymakers have introduced two major incentive packages.
EV 3.0 (2022-2023) focused on stimulating demand through subsidies, tax reductions, and a 1:1 local production requirement. EV 3.5 (2024-2027) builds on this framework by tightening local production ratios, extending support to commercial EVs, and enforcing stricter compliance with domestic standards.
EV imports surged following 2022, and in August 2025, a major Chinese manufacturer began exporting EVs from its Thai facility, marking a milestone in Thailand’s integration into regional supply chains.
Nevertheless, the transition has generated significant frictions. Traditional auto-parts SMEs, specialising in ICE components such as engines and transmissions, are experiencing declining demand and uncertain futures.
Domestic auto sales remain subdued, constrained by household debt and global competition.
Economic analysis indicates that the sector’s contribution to GDP has moderated during the EV transition, with elasticity estimates pointing to a weaker growth impact between 2022 and 2024. Short-term costs – including job displacement, supply chain disruption, and capital reallocation – are substantial.
The transition has disrupted traditional auto-parts suppliers, particularly SMEs focused on ICE components. Domestic auto sales remain weak due to household debt and global competition, while industrial sentiment has softened.
Experts emphasise that inclusive policies are essential to safeguard the transition. Reskilling programmes for displaced workers, transition funds for SMEs, and tailored financing to assist firms in adapting to new technologies could mitigate disruption while enhancing sectoral resilience.
Thailand’s EV transition constitutes a structural inflection point for the economy. With timely, coordinated, and inclusive policies, the country has a critical opportunity to convert its automotive sector into a driver of productivity, innovation, and sustainable growth.
Source: thailand-business-news.com
