Thailand's Finance Ministry is preparing an overhaul of vehicle excise taxes that would provide lower rates to carmakers that establish production operations in Thailand and use locally manufactured materials or components.

Completely built-up (CBU) vehicles imported for sale by companies without investment in Thai production would remain subject to higher excise rates.

The ministry has instructed Permanent Secretary Lavaron Sangsnit and Excise Department Director-General Pornchai Thiraveja to complete the proposed structure by September 2026. The changes would be issued as a ministerial regulation under the Excise Tax Act and could take effect later this year following Cabinet consideration.

EV growth shifts focus towards domestic production

Thailand introduced its latest vehicle excise-tax structure on January 1st, 2026, primarily to support electric vehicles (EVs). The latest review is intended to address the impact of imported EVs on domestic vehicle manufacturers, parts suppliers and workers.

EVs remained a relatively small segment of the Thai market until MG introduced the ZS EV in 2019 at a lower price, although it remained more expensive than comparable internal-combustion engine (ICE) vehicles. Additional brands subsequently entered the market as government investment and consumer incentives, including the EV 3.0 programme, supported wider adoption.

Thailand's EV market expanded further in 2025 and is expected to continue growing in 2026. Industry representatives said the increase in EV sales has not been reflected across the wider automotive market. EVs accounted for 30% of first-half vehicle sales, with imported vehicles representing more than half of EV sales. EV demand has also been supported by volatile and rising oil prices and price competition involving more than 20 brands.

Chinese imports retain 30-40% cost advantage

The EV 3.0 programme, which provided subsidies of up to THB 150,000 (US$ 4,570), has ended. Its successor, EV 3.5, provides support of up to THB 50,000.

Industry representatives said the longer-term imbalance is partly linked to the 0% customs duty available to Chinese vehicles under the ASEAN-China free-trade agreement. This has allowed some manufacturers to rely on imports without establishing completely knocked-down (CKD) production operations in Thailand.

Imported EVs are subject to a 10% excise tax, compared with 2% for locally assembled vehicles. Industry representatives said the eight-percentage-point difference is insufficient to encourage investment because large-scale production and access to raw materials give Chinese manufacturers a 30-40% cost advantage over production in Thailand.

Japanese manufacturers press for tax changes

Automotive groups have raised concerns that continued dependence on imported EVs could affect Thailand's vehicle market, manufacturing industry and parts supply chain. More than 800,000 people work across the country's automotive sector, while 10 automotive associations, the Thai Automotive Industry Association and the Federation of Thai Industries' Automotive Industry Club are among the groups seeking government action.

Suphakorn Rattanawaraha, Executive Vice-President of Toyota Motor Thailand, referred to the industry's difficulties in a personal Facebook post, writing: "We lost Suzuki, but gained Neta."

Suphakorn later said that some imported EVs and locally assembled vehicles qualify for the 2% excise rate despite undergoing basic assembly involving screws and adhesive.

He estimated that the existing arrangements cost the country tens of billions of baht annually and said Toyota pays at least THB 20 billion in excise tax each year.

Suphakorn called for an immediate increase in excise tax on imported EVs, arguing that the existing structure distorts the market. He said a higher rate would distinguish manufacturers investing in Thailand from those relying mainly on imports.

Sarote Maartlert, Vice-President of Mitsubishi Motors Thailand, said carmakers, industry associations and parts manufacturers had discussed the issue with the government. He said officials understood the need to consider both market development and the interests of Thailand's automotive industry.

"The government has reviewed the details, and this also concerns state revenue. Ultimately, I believe this change will directly benefit consumers," Sarote said.

Koji Iwanami, President and CEO of Honda Automobile Thailand, urged the government to consider lowering duties on vehicles imported from Japan or bringing them closer to those applied to EVs imported from other countries.

Honda is interested in bringing several Japanese models to Thailand, but existing import duties make it difficult to offer competitive prices. EVs and range-extended electric vehicles (REEVs) from some countries, by contrast, enter Thailand without import duty.

XPeng studies Thai production base

James Wu, Vice-President of Chinese EV manufacturer XPeng, said the company was aware of discussions surrounding Thailand's excise-tax restructuring and was preparing for a possible increase in taxes on imported EVs.

XPeng began studying the possibility of establishing production in Thailand about six months ago. A decision will depend on the final tax rates and investment incentives announced by the government.

"XPeng remains clear that Thailand is one of its core business plans, whatever changes are made, we are ready to adapt to the rules. If we open a factory in Thailand, we will also need to consider opportunities across the wider region, including ASEAN," Wu said.

Wu said XPeng understood that the government had initially promoted EVs to establish Thailand as a regional production hub but now also needed to address the requirements of domestic parts manufacturers.

XPeng currently assembles its G6 and X9 models in Indonesia. Its newly introduced L03 is priced from THB 899,000 to THB 1.2 million and is intended to expand its customer base.

Lower rates tied to factories and Thai parts

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said lower excise rates would be available only to businesses establishing production bases and complying with requirements to use locally manufactured materials or components.

The proposed benefits would apply to existing and new manufacturers producing ICE vehicles, plug-in hybrid electric vehicles (PHEVs) or EVs.

Eligible manufacturers would need to invest in an operating factory, use domestic materials or parts and begin producing vehicles for export. Companies importing CBU vehicles without investing in Thai production would face higher excise rates.

The distinction is intended to prevent domestic manufacturers from being placed at a disadvantage and encourage investment in vehicle production. The ministry expects to complete its consideration by September, before the end of the fiscal year, and submit the proposal to the Cabinet.

Ekniti said the overhaul could increase domestic production, employment and government revenue from consumers who continue to choose imported vehicles.

"Concerns over revenue collection may be misplaced because this restructuring could actually increase revenue, anyone who wants an imported car will face higher tax, while tax on domestically produced vehicles is already very low. I believe this will kill several birds with one stone by supporting domestic production and employment," he said.

Thailand retains Japanese supply chain

Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council, said efforts by Indonesia to persuade major manufacturers such as Toyota to relocate production would face substantial obstacles.

Thailand and Japan have developed an automotive supply chain over more than 30 years, covering basic components through to advanced technology. Relocating production would require manufacturers to consider supply-chain readiness, costs and production stability.

Danucha said Thailand would remain an ASEAN production base for Japanese carmakers. Thailand's automotive industry continues to face pressure. In the second quarter of 2026, the value of passenger-car exports using conventional combustion technology fell by 42.4%.