Thailand Prepares Car Tax Overhaul as Japanese Automakers Lobby Hard Against EV-Era Rules

Thailand's government is racing to redesign its automobile taxation system by the end of September, following weeks of intense lobbying from Japanese manufacturers who say current policy favors imported electric vehicles over the factories they have operated in the country for decades.

The push gained momentum after Prime Minister Anutin Charnvirakul publicly rejected suggestions of a Japanese exodus during a visit to Wellington on August 21. Speaking to reporters in New Zealand, he insisted that no manufacturer is pulling production out of Thailand, citing strong foreign investment figures. Yet at the same time, he confirmed he had assigned Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas to examine whether the tax framework treats long-established producers equitably — a review few governments commission when an industry is thriving.

At the heart of the dispute are the EV 3.0 and EV 3.5 incentive programs. These schemes allowed companies to bring battery-electric cars into Thailand at a reduced 2% excise rate rather than the standard 8%, with capped import duties and consumer subsidies reaching 150,000 baht per vehicle. In exchange, each participant accepted offset obligations: under EV 3.5, one imported car must be matched by two assembled locally by 2026, rising to one-for-three in 2027 if deadlines slip.

Critics describe these offsets as debts payable in physical vehicles. Firms that shipped in large volumes during 2023 and 2024 must now keep Thai assembly lines running regardless of demand or repay subsidies, excise differences, and penalties — a mechanism that has effectively engineered oversupply and driven showroom prices downward. The fragility became obvious when Neta's Chinese parent entered bankruptcy, leaving its Thai operation owing roughly 24,000 offset vehicles while having produced only about 4,700, despite collecting more than 2 billion baht in subsidies. Regulators subsequently added monthly production forecasts, withheld payments, and bank guarantees, but dealers were already left chasing unpaid invoices.

The strain is visible across the industry. Subaru's contract assembly operation halted at the close of 2024. Suzuki said it would shut its Pluak Daeng factory by the end of 2025, describing the move as optimizing global production — a plant originally created under the earlier Eco Car incentive scheme. Honda ended vehicle production at its Ayutthaya facility, dating to 1996, folding assembly into Prachinburi while converting Ayutthaya to component work; nationwide capacity stood at 270,000 units against actual output below 150,000 for four consecutive years. There is also precedent for capacity changing hands entirely: when General Motors departed in 2020, China's Great Wall Motor acquired its Rayong plant.

Japanese executives stress this is advocacy rather than retreat. Koji Iwanami, president and CEO of Honda Automobile (Thailand), argued at the launch of the Super-ONE EV that fully built vehicles from Japan, Europe, and the United States face import duties of up to 80%, while battery and range-extended EVs from certain free-trade partners enter duty-free. Honda is seeking something nearer parity so it can import models such as the Freed and Jazz, which cannot fit within Prachinburi's 110,000-unit ceiling. A second demand concerns tightening local-content thresholds for hybrids: Honda says four hybrid models cannot realistically be re-engineered mid-cycle, exposing them to excise jumps from 6% to 8% and then 10% — painful increases in a market where household debt has constrained loan approvals for three years. Six Japanese brands are jointly pressing an eight-point agenda through the Japanese Chamber of Commerce in Bangkok. Toyota has lodged similar objections that imported EVs enjoy a lighter effective burden than Thai-built cars, even as it publicly dismissed moving production after Indonesia's finance minister invited it to Jakarta on August 4.

Bangkok's answer includes a new excise category for mild hybrids: 10% for vehicles below 100g/km of CO2 and 12% for 101–120g/km, guaranteed through 2032, contingent on at least 5 billion baht of investment, domestically made batteries from 2026, locally sourced motors or assist parts from 2028, and four of six advanced driver-assistance features. Mazda moved quickly, securing Board of Investment approval for over 7.4 billion baht at its Rayong alliance to build a mild-hybrid B-segment SUV from 2027, while Isuzu committed more than 15 billion baht and Mitsubishi outlined 16 billion baht over five years for hybrid work. The logic protects a supply chain of more than 2,400 firms and 700,000 workers whose products — starters, alternators, injectors, converters, transmissions — have little place in a pure EV.

Because tariffs on Chinese-built cars are locked down by the ASEAN-China free trade agreement, excise law remains the government's only domestic lever: lower rates for those building in Thailand with local parts, standard rates for finished-car importers. Ekniti has ordered permanent secretary Lavaron Sangsnit and Excise Department chief Pornchai Theeravech to finalize the structure as a ministerial regulation, allowing implementation within 2026 without parliamentary approval — a rewrite that will also shape what pickup buyers from Australia to South Africa see in showrooms by 2028.