From Diesel to Electric: Thailand’s Transition to an EV Manufacturing Powerhouse

Production and sales of electric vehicles (EVs) in Thailand have been on the rise in recent years due to the shift in demand from gasoline-powered cars to lower-emission vehicles, alongside the Thai government’s efforts to boost domestic productivity. The government aims to see the country producing all types of electric vehicles (passenger car, commercial vehicle, motorcycle, scooter, etc.) to comprise 30% of total vehicle production by 2030, with projections of 725,000 units of cars and 675,000 units of motorcycles per year.  As of 2023, there were approximately 2,658 charging stations serving 196,991 new EV car registrations in Thailand. Of these, 51% are Battery Electric Vehicles (BEV), 43% are Hybrid Electric Vehicles (HEV), and 6% are Plug-in Hybrid Electric Vehicles (PHEV).

Although imports of PHEV in Thailand grew by 345% YoY in 2023, specially from Chinese and German manufacturers, the overall import of EV components sank by 3% YoY. With significant inflow of FDI from global automakers into the country over the past three years, Thailand has been transitioning into an EV hub for the region, where the existing Thai auto manufacturing and auto parts makers are now increasingly investing in technologies and in EV component diversion to better serve their OEM and EV assemblers.

Thailand’s legacy as the largest automotive hub in Southeast Asia and the 10th largest in the world, together with demand from the global EV market, has enabled this transition. Thailand’s total EV component exports to the world reached US$562 billion in 2023. The country has become the 3^rd largest producer and exporter of EV electronic components for the Japanese market and the 9^th largest for the U.S. market.  Thailand’s total EV component exports to the world reached US$562 billion in 2023. China was Thailand’s largest export destination for EV components, accounting US$171 billion in 2023; meanwhile, the U.S. market received US$2.69 billion, or 2.6% of the country’s exports.

Within the EV market, the electric drivetrain, battery and fuel cell, AD/AS and sensor, electronics and climate control components are among those experiencing the greatest growth. At the same time, transmission, exhaust system, diesel and gasoline engine and fuel systems have been decelerating in growth. Anticipating and responding to these trends, the Thai government has sought to be ahead of the EV production curves by providing significant investment incentives and subsidy privileges such as corporate income tax exemptions up to 8 years, import duty exemptions on machinery and raw materials for export, 1-5 years of corporate income tax exemption for R&D Center and Training, and land ownership. As a result, Thailand’s Board of Investment (BOI) has granted promotions to 17 manufacturers of EV batteries, 14 manufacturers of high-density batteries, and 18 manufacturers of EV components by the end of 2023 with combined investment values of USD 316 million, USD 324 and USD 161 million, respectively. For EV infrastructure, the BOI has approved investment privileges for 11 companies to establish EV charging stations in Thailand, with a combined investment value of over USD 137 million.

However, these EV subsidies have unintentionally resulted in instability for the local traditional automative supply chain by facilitating the oversupply of the Chinese imported EV components and a domestic price war. It also hurts major Japanese automakers competing with the Chinese manufacturers, as well as various legacy Thai suppliers, as Chinese EV makers generally prefer Chinese imported parts and their own lower-cost supply chains. Honda, Subaru and Suzuki are among those automakers who announced to cut and halt their Thai production capacity by 2025.

On the other hand, EV conversion (or EV retrofitting) has recently become a feasible investment and alternative for the Thai automative sector— especially for land transportation—for both the public and private sectors.

Thailand’s public transportation and commercial vehicles present another big opportunity for the country’s EV industry.  From the notable Tuk Tuks, 4-wheele cars so-called Songthaew buses and heavy-duty trucks, to canal ferries and speedboats, all have relied heavily on diesel engine. As of 2023, Thailand has more than 120,000 passenger buses and coaches, and 414,700 railroad trucks registered with Department of Land Transport. Bangkok Mass Transit Authority (BMTA) alone has more than 3,000 diesel buses currently serving in the capital city, such as Hino AK176, Isuza MT111QB, Mitsubishi Fuso RP118, and Mitsubishi Fuso RP118. With the new Euro 5 emission standards effectively implemented in January 2024 to reduce PM emissions, replacing and retrofitting fossil fuel engines with electricity has become an absolute winning solution for many stakeholders in the country.

Most of these commercial vehicles aim to be modified or refitted, and the conversion costs can be up to 50% lower than buying a new vehicle. However, the Thai developers and manufacturers are not yet mature to design their own circuit diagrams and control units such as Signal Reengineering, Controller Area Network (CAN) Protocol: Adapt vehicle signals and integrate CAN protocol. As a result, the local industry relies heavily on collaborative partnerships with oversea producers who specialize in electric mobility solutions.

Highlight of Thailand’s Electric Vehicle/ Mobility Ecosystem

Opportunities and challenges for Thailand’s EV industry lay upon the significant shift in global automakers who relocated or expand their plants to Thailand together with the government investment incentives. The industry presents exciting prospects; however, it still lacks advanced infrastructure development, innovation and supply chains in semi-conductors, battery, and tier 2-3 auto parts, which collaborations with overseas developers and manufacturers.  By leveraging Thailand’s current strengths in its automotive capacity and collaborating with local players, overseas developers can contribute to the country’s EV growth and be part of its exciting journey toward becoming a global hub for electric vehicles.

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Authored by

Yada Saraneeyatham is a Senior Research Analyst at Tractus. Based in Bangkok, her expertise is in identifying partners and business opportunities key to business growth in Thailand. She has been a part of the team responsible for local market and industrial research, logistics strategy, Thailand market entry strategies, trade promotion, regulation analysis and implementation practices in Thailand and across Asia.

To learn more about opportunities for your company to find success in the Thai market, follow us on LinkedIn or contact Yada (yada.s@tractus-asia.com) today.