Thailand's Cabinet has approved an increase in excise tax on fully imported battery electric vehicles (BEVs) from 10%-35%, and range-extended electric vehicles (REEVs) from 15%-35%, effective January 1st, 2027.

The measure is intended to encourage foreign automakers to establish local manufacturing operations, increase domestic component sourcing and maintain Thailand's role as a regional vehicle production and export base.

The decision was approved at the Cabinet's off-site meeting in Udon Thani on November 3rd, 2026. Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said the government intended to prioritise companies manufacturing vehicles in Thailand and employing local workers, while attracting further investment in the automotive industry.

The revised rates will apply to eligible vehicles imported as fully built units, including those that do not use locally manufactured components. Electric vehicles manufactured in Thailand will retain the existing 2% excise tax rate. Special rates are also being considered for companies making new investments in vehicle production or the manufacture and assembly of key components.

The January 2027 implementation date is intended to give automakers and dealers time to adjust their business plans. However, import quota arrangements that could allow manufacturers investing in Thailand to retain existing tax rates on eligible imported vehicles have yet to be finalised. The allocation framework and procedures for these concessions remain under discussion.

Government outlines domestic manufacturing measures

Ekniti said Thailand needed to maintain its position as a production and export base while supporting companies that provide employment and contribute to the domestic economy. He added that local manufacturers had received insufficient support amid changes in the global automotive industry and increasing competition from imports.

The Cabinet has instructed the Excise Department to discuss investment plans with businesses and determine special rates for qualifying investors. Ekniti said several companies had approached the department regarding the establishment of operations or expansion of production in Thailand.

The government also plans to explain the revised policy during a roadshow with the Board of Investment in Japan on November 17th, 2026. Ekniti said the measures would apply to all manufacturers producing vehicles or components in Thailand, rather than exclusively favouring Japanese investors.

Industry Minister Varawut Silpa-archa said higher excise taxes could offset import-duty concessions and address the difference in tax treatment between manufacturers with Thai production facilities and sellers of fully imported vehicles. He added that the government intended to maintain its support for established automakers and suppliers, including Japanese companies that had operated in the country for several decades.

Varawut noted that conventionally powered vehicles contain around 20,000-30,000 parts, compared with only thousands of components in an electric vehicle. He warned that greater dependence on imported vehicles and components could weaken Thailand's automotive supply chain and affect local small and medium-sized suppliers.

Under the revised structure, tax rates will be linked to domestic content, with companies using more locally manufactured components eligible for lower rates. Varawut cited Mitsubishi pickups, some of which have local content exceeding 60%, with certain variants reaching 70%-80%. The government will continue consulting automakers on issues arising from the transition.

The decision follows warnings from Thai automotive industry groups in May 2026 that domestic manufacturers were struggling to compete with lower-priced EV imports from China. Industry representatives had called for policy changes to support local production and investment.

The latest revision follows changes to Thailand's vehicle excise tax structure on January 1st, 2026, and decisions by the National Committee for Electric Vehicle Policy during 2025 and 2026. Some industry participants have questioned the frequency of policy changes and their impact on the investment conditions under which foreign manufacturers entered the market.

Critics argue that importers have complied with existing regulations, paying 10% excise tax compared with the 2% applicable to qualifying locally assembled vehicles. Imports have also remained commercially viable because production costs in China are reportedly at least 30% lower than in Thailand.

Although some have attributed the latest decision to pressure from Japanese manufacturers facing competition from Chinese EV brands, the proposed increase had been under discussion for several months and was initially expected to be finalised in September 2026. Reports indicated that flooding may have delayed the decision.

Sunhavut Thamchuanviriya, group chief executive and director of Millennium Group Corporation (Asia) Public Company (MGC-ASIA), said the increase had been anticipated, as reports had indicated that the government was considering raising the rate to around 35%.

He expects companies that had already planned to assemble vehicles locally from completely knocked-down (CKD) kits to accelerate their projects. Businesses without local assembly plans could face greater difficulties competing in Thailand's automotive market.

Chinese manufacturers consider local assembly

Several Chinese automakers, particularly those with existing or planned manufacturing operations in Thailand, have supported the revised tax structure. While Japanese manufacturers have been among the main advocates for policy changes, an automotive industry source told media sources that Chinese companies with local assembly operations had also backed the increase. Other brands are evaluating domestic production to maintain their competitiveness.

Sunhavut said companies considering local assembly were likely to accelerate their plans as policy details became clearer. Several manufacturers have outlined potential investments, although partnerships, production arrangements and investment structures remain undecided.

Anuwat Inthraphuvasak, chief executive of AI Mobility, the Thai distributor of Voyah, said the company and Voyah's parent, Dongfeng Motor, had agreed on the need to establish a production line in Thailand. Discussions began ahead of Voyah's planned market entry and the launch of its first model in late November 2026. The partners are awaiting further government details before deciding whether to establish a joint production facility with a third partner or use a contract assembler.

Leapmotor is also examining local assembly as part of its Thailand operations. Liam Liu, general manager of Leapmotor Thailand, said the company was considering an investment horizon of 10, 15 or even 60 years, rather than three to five years. He said Leapmotor intended to establish a long-term presence comparable to Toyota's operations in the country.

The company is studying a CKD assembly operation and plans to send a team from China in November 2026. Four possible assembly arrangements have been identified, with initial annual production capacity estimated at 60,000-80,000 vehicles. Leapmotor has confirmed plans to invest in a Thai factory and begin production in 2027. General manager Liu Ning said the company would comply with government regulations and that the revised tax structure would not affect its investment plans in Thailand.

XPeng vice-president James Wu said the company had anticipated the tax restructuring and supported measures to encourage local assembly and protect the automotive component industry. XPeng continues to study a CKD operation and is prepared to consider opportunities in other ASEAN markets if it establishes a Thai factory. The company is also examining manufacturing investment following earlier commitments in Indonesia and Malaysia. Wu said XPeng was working with MGC-ASIA on its long-term business plans, although no investment details or timetable had been announced.

Rever Group chief executive Pratarnwong Phornprapha also supported the revised structure, noting that BYD and Rever had invested in Thailand and sourced components locally. He said the competitive landscape should increasingly distinguish between companies investing in Thai manufacturing and those importing vehicles without establishing local production. Rever is also discussing the possibility of manufacturing additional BYD models at its Thai factory.

Imported EV prices and year-end demand

The higher excise tax is expected to increase the prices of imported EVs from January 2027. The extent of the increase will depend on how much of the additional cost manufacturers and distributors absorb.

A senior executive at a Chinese automaker estimated that some imported EVs could become up to 10% more expensive, adding tens or hundreds of thousands of baht depending on the model. The executive said retail price increases were unlikely to reflect the full 25-percentage-point rise in the BEV tax rate.

Brands without local production plans, including Tesla, Volvo, Porsche and Audi, are expected to be more affected. Chinese manufacturers such as Geely and Leapmotor are adjusting their investment plans to accelerate the establishment of Thai assembly facilities during 2027.

The Federation of Thai Industries (FTI) expects EV purchases to increase towards the end of 2026 ahead of the tax revision. Suwat Supakandechakul, chairman of the FTI's Automotive Industry Club, expects demand, imports and bookings to rise before January 1st, 2027. The 12-day Thailand International Motor Expo, beginning December 2nd, 2026, is expected to reflect this trend.

Bookings at the previous year's Motor Expo exceeded 70,000 vehicles following the expiry of the EV 3.0 incentive programme. An industry source said some brands were already increasing imports ahead of the tax revision, potentially contributing to EV market growth during 2026.

However, the FTI has called for safeguards against market distortions, including excessive imports before the end of 2026 that could weaken demand in 2027. It has also raised concerns about the tax treatment of vehicles ordered before the deadline but delivered after January 1st.

Suwat warned that the policy could further affect Thailand's pickup market, as buyers might postpone purchases of conventional pickups and switch to EVs before the higher taxes take effect. Pickup sales fell 16% year on year between January and September 2026, according to the Automotive Industry Club.

The Excise Department is preparing a pickup trade-in programme offering THB 40,000 (US$ 1,190) per vehicle, targeting 150,000 participants. Suwat questioned whether the subsidy would be sufficient to revive demand and called for more flexible financing options from the government and manufacturers to improve access to vehicle loans.

EV investment and market growth

Thailand's EV policy includes tax incentives, investment support and purchase subsidies aimed at attracting manufacturers and developing domestic production. These measures have attracted international automakers, particularly Chinese companies such as BYD, Great Wall Motor and Changan.

The Board of Investment reported that cumulative investment approvals across Thailand's EV ecosystem reached US$ 4.59 billion across 189 projects as of August 2026. Separate industry reporting put investment attracted through funding programmes, tax incentives and purchase subsidies at more than EUR 3.5 billion (US$ 3.9 billion), with approved investment across the wider electromobility ecosystem equivalent to EUR 4.1 billion across the same 189 projects.

The government intends to link preferential tax treatment for imported vehicles to commitments to establish local manufacturing operations. The policy is intended to limit reliance on imported EVs and maintain Thailand's role as a production and export base. Increasing the share of locally manufactured components is also expected to support domestic suppliers, generate local economic value, retain employment and encourage existing manufacturers to expand as the industry transitions towards electrification.

Electrified vehicles accounted for 55% of new-car registrations during the first seven months of 2026, exceeding the share of conventionally powered vehicles for the first time, according to the Board of Investment. The category includes EVs, hybrids and plug-in hybrids.

Thailand's automotive industry includes established manufacturing operations operated by companies such as BYD and Toyota Motor. The revised tax structure is intended to retain these operations, attract further investment and increase the contribution of EV production to domestic manufacturers, component suppliers and workers.