EV industry seeks Government support amid slowing sales

In a significant development for Thailand's burgeoning electric vehicle (EV) industry, major manufacturers are seeking to renegotiate government incentives as sales figures fail to meet projected targets. The Electric Vehicle Association of Thailand (EVAT), representing a coalition of Chinese and Japanese firms, has approached the government with a proposal to extend production deadlines set under the current incentive scheme.

Thailand, long renowned as a regional automotive manufacturing hub, has invested heavily in transforming itself into a centre for EV production. The government's EV 3.0 plan, which offered substantial tax breaks and other support measures, successfully attracted over USD 1.44 billion in investments from Chinese EV makers such as BYD Motors and Great Wall Motor. This influx of capital was intended to catalyse Thailand's transition from traditional automobile manufacturing to becoming a key player in the global EV market.

However, the industry is now grappling with unforeseen challenges. Suroj Sangsnit, President of EVAT and Executive Vice President of SAIC Motor-CP, revealed in an exclusive interview with Reuters that the association is negotiating with the government to extend production deadlines. "We're trying to negotiate, extend the production date a little," Sangsnit stated. "The conditions say we have to produce within a year, so can we ask for another year?"

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The current EV 3.0 plan mandates that companies receiving incentives must produce in Thailand this year the equivalent number of vehicles they imported between 2022 and 2023. Failure to meet this deadline results in a more stringent requirement for the following year, obligating manufacturers to produce 1.5 cars for each imported vehicle.

Major Chinese companies at the forefront of this push for change include BYD, MG Motor (owned by SAIC Motor Corp), and Great Wall Motor. These firms, which have made substantial investments in Thailand's EV sector, are now seeking flexibility in light of market realities.

The request for deadline extensions is part of a broader strategy by the EV industry to address lower-than-expected sales. Earlier this year, industry representatives met with Thai central bank officials to discuss challenges facing the sector. One key outcome of these discussions was a potential revision in how banks calculate income for auto loan applications, potentially considering household income rather than individual earnings.

The slowdown in EV sales is reflective of wider economic challenges in Thailand. New EV sales this year have reached only 43,000 units, far below EVAT's target of 100,000. This underperformance mirrors a broader contraction in the Thai auto industry, with car production declining by 17.28% in the first seven months of 2024 compared to the previous year.

Several factors contribute to this sluggish market performance. Suroj Sangsnit pointed out that banks have become hesitant to issue EV loans due to deep discounts affecting asset prices. Moreover, Thailand's record-high household debt levels are constraining credit availability, making it increasingly difficult for consumers to finance EV purchases.

The situation is further complicated by Thailand's ambitious goal of converting 30% of its annual vehicle output of approximately 2 million to electric vehicles by 2030. This target, while ambitious, now faces significant hurdles given the current market conditions.

As the industry awaits a response from the government, the Board of Investment, which oversees the incentive scheme, has refrained from commenting without guidance from the cabinet of new Prime Minister Paetongtarn Shinawatra. This cautious approach underscores the delicate balance between supporting a nascent industry and ensuring fiscal responsibility.

The outcome of these negotiations could have far-reaching implications for Thailand's automotive sector and its aspirations to become a leading EV producer in Southeast Asia. If successful, the proposed extensions could provide much-needed breathing room for manufacturers to align their production capabilities with market demand. However, it also raises questions about the long-term viability of the current incentive structure and whether additional measures might be necessary to stimulate EV adoption among Thai consumers.