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Thailand Tightens EV Subsidies to Prevent Oversupply and Sustain Growth

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  //automotive-transportation.news-articles.net/co .. es-to-prevent-oversupply-and-sustain-growth.html
  Published in Automotive and Transportation on Tuesday, November 25th 2025 at 7:33 GMT by reuters.com

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Thailand Tweaks Electric‑Vehicle Policy to Curb Potential Oversupply and Sustain Growth

Bangkok, Nov. 25 – In a bid to keep its electric‑vehicle (EV) ambitions on track while preventing a costly oversupply, Thailand’s government unveiled a set of policy adjustments on Monday that will reshape the country’s EV subsidy framework, tax incentives and battery‑production incentives. The moves come as the Thai auto industry faces mounting pressure from a global surge in EV demand, a slowing domestic market, and the risk of a “price war” with heavily subsidised Chinese competitors.

A Quick Look at Thailand’s EV Landscape

Thailand has long touted itself as “the Toyota of the East” and has become the world’s largest automotive assembly hub. In the last decade, it has also positioned itself as an emerging EV power plant, with ambitious targets to capture a sizable share of the global electric‑car market. The government’s 2021 “Smart City” and “Electric Vehicle 2030” roadmaps set a goal of 300 000 EVs on Thai roads by 2030, with a near‑term target of 30 % EV penetration in the passenger‑car segment by 2025.

The policy mix that propelled this growth has been a generous subsidy system – up to 400 000 baht (≈US $10 800) for battery‑electric cars (BEVs) and 200 000 baht for plug‑in hybrids – coupled with tax breaks, free tolls for electric buses and a push for local battery production. By the end of 2023, more than 10 000 EVs had been sold, and a number of domestic manufacturers – such as Thailand Auto Group (TAG) and the Thai‑Chinese joint‑venture BYD‑Thai – announced plans to ramp up production.

What the New Policy Changes Entail

1. Gradual Reduction of Direct Subsidies
The most headline‑grabbing change is a two‑stage reduction in direct purchase subsidies. The government will lower the cap for BEVs from 400 000 baht to 300 000 baht in 2024, and further to 200 000 baht in 2025. Hybrid subsidies will follow a similar trajectory, cutting from 200 000 baht to 150 000 baht over the same period.

2. Expansion of Tax Incentives
To offset the subsidy cut, the Ministry of Commerce will introduce a tax‑credit program that offers up to 100 000 baht per vehicle for EVs that meet certain battery‑capacity and emissions standards. The incentive will be structured as a one‑time rebate, payable when the vehicle is registered.

3. Incentivising Domestic Battery Production
Thailand will also increase the feed‑in tariff for locally produced lithium‑ion battery cells. Companies that meet a minimum capacity threshold will receive a fixed premium of 1 % on the purchase price of the cells, aiming to make local production more attractive against imports.

4. Re‑engineering the Export‑Subsidy Framework
The export‑subsidy scheme that has been used to promote Thai‑assembled EVs in export markets will be tightened. Exporters will now have to demonstrate that their vehicles meet certain “green‑tech” criteria, including a minimum of 40 % recycled content in battery cells.

Why Thailand is Making the Shift

The primary driver behind the policy overhaul is the risk of an oversupply of EVs that could trigger a collapse in prices and erode the industry’s financial viability. Analysts note that the surge in global EV demand, spurred by stricter emissions regulations and a pandemic‑era shift toward greener transport, has also attracted a flood of low‑cost Chinese EVs to the Thai market. These vehicles often come with subsidies from the Chinese government, creating an uneven playing field.

“Thailand’s subsidy model worked well during the early growth phase, but it’s becoming unsustainable,” said Dr. Anan Boonprasert, a senior researcher at the Thai Institute of Economic Studies. “If we keep pouring money into subsidies without a corresponding increase in domestic manufacturing capacity, we’ll see a bubble that could burst in a few years.”

The policy changes are also designed to align Thailand’s EV strategy with its broader economic goals. By encouraging local battery production and offering tax rebates for greener models, the government hopes to spur technology transfer, create high‑skill jobs, and ensure that the country remains competitive as global supply chains pivot toward the future of mobility.

Potential Impacts on Stakeholders

Automakers
Manufacturers will need to adjust pricing strategies to accommodate the subsidy cut while still appealing to cost‑sensitive consumers. Those that can offer competitive battery technology or incorporate more domestic components may benefit from the new tax‑credit structure.

Consumers
While the direct subsidy reduction could raise EV prices by an estimated 5–10 %, the tax rebate may offset part of that cost. Consumers with strong environmental incentives or those who drive high‑mileage routes may find the net price difference negligible, especially if free tolls for EVs continue.

Battery Producers
The enhanced feed‑in tariff provides a direct financial incentive for companies to build or expand local battery cells. This could accelerate the development of Thailand’s battery‑production ecosystem and reduce reliance on imports, a key factor for national security and supply‑chain resilience.

Exporters
The tightening of the export‑subsidy criteria will require exporters to adopt greener battery designs, potentially boosting the export quality of Thai‑assembled vehicles. However, the stricter requirements may increase costs in the short term, impacting export volumes.

Broader Context and Forward Outlook

The article also cites Reuters coverage of a broader global trend, noting that many emerging markets are now reviewing their EV subsidy frameworks. For instance, India and Indonesia are experimenting with hybrid subsidy‑tax models that mirror Thailand’s new approach. A link to a Reuters story on “India’s EV policy recalibration” provides further context on how policy shifts are being tailored to each country’s unique market dynamics.

Experts agree that Thailand’s policy tweak will likely stabilize the EV market, but the transition period will be critical. “We are essentially walking a tightrope between maintaining market confidence and preventing a subsidy drain,” noted Pranee Rattanaprasit, chief economist at Siam Financial Group. “If the government can keep the policy mix balanced, the EV industry could still reach the 300 000‑unit target by 2030, albeit on a more sustainable footing.”

As the Thai government implements these changes, industry participants will be watching closely. The policy shift signals a maturation of Thailand’s EV ecosystem, moving from a high‑growth, subsidy‑heavy model to a more market‑driven, technology‑centric strategy. Whether this will unlock the full potential of Thailand’s automotive sector remains to be seen, but the path forward is clear: sustainable growth, balanced incentives, and a focus on domestic capability.