The Thai government is moving to adjust its electric vehicle (EV) promotion policies in response to a growing risk of market oversupply that could destabilize the domestic EV sector. The current subsidy framework, designed to stimulate local production while controlling imports, is being reconsidered to address a mounting price war and surplus inventory.
Under existing regulations, EV manufacturers importing vehicles into Thailand receive government subsidies intended to support buyers. However, these incentives come with conditions requiring manufacturers to establish and expand local production facilities to compensate for imported EV volumes. For example, the EV 3.5 scheme mandates that by 2026, manufacturers must produce twice the number of EVs domestically to offset imports, increasing to three times by 2027. Failure to meet these quotas obligates manufacturers to repay the subsidies received.
Despite these provisions, the government did not fully anticipate the rapid intensification of competition within the EV market, which has led to an influx of vehicles and aggressive pricing strategies. According to a confidential source within the Ministry of Finance, discussions are underway with the Board of Investment (BoI) to explore adjustments to the domestic production offset formula. The goal is to ease pressures caused by oversupply and mitigate the adverse effects of the ongoing price war.
The price competition has been notably intense in China, the world’s largest EV manufacturer, where steep price cuts have forced many smaller or less competitive producers out of business. The source highlighted an unusual tactic wherein new EVs are first registered and then sold as “used cars” despite minimal or zero mileage. This practice allows manufacturers to sell vehicles at substantially reduced prices, boost sales volumes on paper, and improve cash flow, although it distorts market dynamics.
The BoI, tasked with promoting investment in EV manufacturing, considers the automotive sector a vital contributor to Thailand’s economy. The industry supports more than 2,000 parts suppliers and provides employment for over 900,000 people. Between 2022 and 2024, registrations of battery EVs, plug-in hybrids, and hybrid EVs surged from 84,500 to 206,000 units. During this period, the BoI received 644 investment promotion requests related to EV and parts manufacturing, with investments totaling over 280 billion baht.
However, concerns are mounting within the BoI about the potential for an EV glut in the local market, which could fuel persistent price wars and weaken the domestic automotive industry. In response, the EV Board agreed at the end of last year to revise the local production offset conditions. The initial EV 3 scheme required a one-to-one ratio of local production to imports by 2024, increasing to 1.5 times by 2025. Now, manufacturers may extend this timeline under the EV 3.0 measure and comply instead with the stricter EV 3.5 conditions—doubling local production by 2026 and tripling it by 2027.
It is important to note that EVs qualifying for this extension are not eligible for government subsidies until manufacturers meet the local production requirements. Similarly, EVs imported or produced under the EV 3.5 scheme cannot receive subsidies until local production quotas are fulfilled for the granted extension volume. Additionally, completely built-up units imported under the EV 3.0 scheme but left unsold may be exported abroad; however, such exports do not count towards fulfilling the local production compensation requirements.
The adjustments seek to balance support for the EV industry with the need to maintain market stability amid rapid growth and shifting global competition. Officials involved in the discussions include representatives from the Ministry of Finance and the Board of Investment, who continue to monitor the evolving situation closely.
