Thailand’s objective to grow domestic EV production
In 2024, Thailand ranked as the world’s tenth-largest automotive producer. Among ASEAN member states, Thailand is the region’s primary automotive production hub. The automotive sector contributed approximately 12% of Thailand’s overall GDP in 2024.
Thailand’s automotive manufacturing industry is currently dominated by foreign companies, with Chinese EV manufacturers holding a leading position in the EV market in 2023.
In 2020, the Government of Thailand established the EV Policy Board to develop and oversee EV incentive schemes, attract investment, and achieve the objective of zero-emission vehicles accounting for 30% of total vehicle production by 2030 (the “30@30 target”).
The EV Policy Board has introduced incentive schemes to support EV adoption and promote local production through tax reductions, import duty relief, and subsidies. The EV3 package, launched in February 2022 and implemented from 2022 to 2023, provided incentives such as reduced import duties on fully built-up EVs and lower excise taxes.
The EV3.5 package, launched in November 2023 and implemented from 2024 to 2027, retains the core incentives of the EV3 package while introducing several changes, including an LCR for imported EV battery cells that must be met to qualify for the incentives.
Local content requirement for EV battery cells
EV manufacturers and parts suppliers seeking to benefit from the EV3 and EV3.5 packages are required to enter into a Memorandum of Understanding with Thailand’s Excise Department.
Under the EV3.5 package, one eligibility criterion for incentives is compliance with a 40% LCR. Under this requirement, 40% of the EV’s ex-factory price (i.e., total value of raw materials for production and profit) must originate from approved local sources, including domestically produced components and domestic labour.
As Thailand’s domestic battery cell industry remains underdeveloped and cannot currently meet industry-wide demand due to limited technology and skilled labour, the EV3.5 package temporarily allows a proportion of imported battery cells to be counted towards the 40% local content requirement. This is intended to support the development of domestic EV battery manufacturing capacity.
To encourage foreign EV manufacturers to localise production in Thailand and establish joint ventures with local companies and suppliers, particularly in battery cell production, the EV Policy Board intends to reduce the maximum share of imported battery cells that may count towards the 40% LCR from 15% to 10% from January 2026 until 30th June 2026.
This six-month period is intended as a transitional arrangement to allow manufacturers to adjust supply chains and scale up domestic battery production. After 30 June 2026, imported battery cells will no longer be eligible to count towards the 40% LCR.
EV manufacturers wishing to continue counting 10% of imported battery cells as local content until 30 June 2026 must submit a domestic sourcing plan, demonstrating how battery cells will be sourced domestically in the future. The notification regulating these changes is pending approval from the Thai Cabinet, and enforcement is currently on hold.
