Thailand steers towards ZERO Emission Vehicle

Sinchai Phamornphol

Half of EVs sold in Thailand in 2030 are set to be locally produced Thailand is working hard to steer the automotive industry into the EV (electric vehicle) era, both in terms of usage and production, which is undoubtedly a challenging feat.

The government, however, considers this a necessity as Thailand must keep pace with world trends – and all roads seem to be heading in this direction.

In March, the National Electric Vehicle Policy Committee accepted the private sector’s call to bring the country’s EV plan forward by five years.

This means that half of the EVs sold in Thailand should be locally produced by 2030, and by 2035 all EVs sold here should be produced locally.

Meanwhile, the accumulated usage target for EVs by 2025 is slightly over 1.05 million vehicles, made up of 420,000 passenger cars and pickup trucks, 622,000 motorcycles and 31,000 buses and trucks. By 2035 the figures will grow to 15.58 million units, with 6.4 million passenger cars and pickup trucks, 8.75 million motorcycles and 430,000 buses and trucks.

These targets are significant because the government said it is aiming for ZEV or zero-emission vehicle, which implies the vehicle needs to be 100-per-cent electric.

This may be a challenging goal even though EVs have become a global trend and automakers are shifting their production. Established brands as well as newcomers seem to want to follow in the footsteps of American manufacturer Tesla, who was the first to come up with electric vehicles.

However, considering Thailand’s potential in manufacturing, infrastructure and market preference, the question is whether it can reach the targets laid out.

Slow pick-up

According to the Electric Vehicle Association of Thailand (EVAT), some 3,000 EVs were registered in the country last year. This number is tiny considering there are more than a dozen EV models for sale, such as Hyundai’s Kona and Ioniq, Nissan

LEAF, Audi’s e-tron Sportback, BYD E6 and M3, FOMM One, Jaguar i-Pace, Lexus UX 300e, MG ZS EV, Mini Cooper SE, Porsche Taycan, Takano TTE 500 and even Tesla Model 3.

This year, newcomers to the EV scene include the Volvo XC40 Recharge Pure Electric, Audi e-tron GT as well as the BMW iX and iX3.

However, the real driving force in the Thai EV market is the MG ZS EV, which commands a 90 per cent market share, leaving little opportunity for other models.

The sales volume, however, has been rising in the xEV category, which also includes hybrids and plugin hybrids that requires an internal combustion engine (ICE), with 35,300 registered last year.

The biggest obstacles to the expansion of electric vehicle use are retail pricing, operating range per charge and availability of charging facilities.

As a result, EV consumers are those who own more than one vehicle, with home charged EVs being used for short commutes or to nearby destinations without having to rely on public charging stations.

Unaffordable despite incentives

As for pricing, top sellers like MG ZS go for 1.19 million baht compared to between 679,000 and 799,000 baht for the ICE

version. Despite enjoying a lower excise duty of 8 per cent, the ZS EV still costs 400,000 more than its ICE siblings.

The high price has been put down to the battery, which accounts for 40 per cent of the vehicle’s cost. For longer distances, a larger battery is required, which results in the price rising further.

The Thai government has been promoting the local production of EVs with incentives like a reduction in excise duty. Investments made under the Board of Investment (BoI) will enjoy 2-per-cent excise duty and will not be charged any from January 1, 2020, to December 31, 2022.

However, it will take time to see if these incentives are strong enough to attract investors.

The biggest problem now is that though many companies have applied for BoI privileges, none have made any serious moves. Many are concerned about whether their EVs will be able to compete in the market, despite enjoying lower excise tax. Another big concern is the Asean-China Free Trade Area scheme, which includes the lifting of import and export duties for electric vehicles.

This has resulted in EVs sold locally having a completely different cost structure. For instance, the MG ZS EV from China has no import duty and is sold at 1.19 million baht, while the Nissan LEAF from Japan (which also has a free trade pact with Thailand) is still hit with a 20-per-cent import duty and is sold at 1.99 million baht.

Uncertain market

Another problem faced by investors is uncertainty of the market size, which means they are unable to tell if there will be adequate economy of scale for their investment, even with the tax breaks.

EVs from China may carry higher excise duty than locally produced ones, but because they come from a huge market with huge production facilities, the cost per unit is dramatically lowered.

Also, don’t forget, top automakers like BMW, Mercedes-Benz, Volvo and even Tesla, are shifting manufacturing units to China.

The BMW and Volvo EVs sold in Thailand are imported from China, while Mercedes-Benz also plans to introduce its China-made EQS in Thailand soon.

Though many companies have said they are eyeing Thailand as an EV-production base, we will have to wait and see which brand shows up first. Will it be an established European brand or a Chinese automaker like MG or newcomer Great Wall Motor? (Great Wall Motor plans to introduce its ORA Good Cat EV later this year.)

If Chinese firms, which are already enjoying zero import duty for their products, decide to produce EVs in Thailand to serve both the local market and other right-hand-drive markets, it will be mutually beneficial. Also, it will not only prove that investing in Thailand is attractive, but will also help it achieve its 100-per-cent ZEV target.