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4 Dec 2020

Econ Digest

Thailand is striving towards an electric vehicle production base in the region

         Although the latest EV promotion package which expired at the end of 2018 received a good response, reflected by the number of companies applying for investment promotion, only some of them have made actual investments, due to the impact of various factors such as the continuing limitations of global battery technology development, some investment coming to a standstill due to COVID-19, and the inability of incentive packages to effectively meet the demands of investors and consumers. 
         However, the current global electric vehicle industry has changed, and its growth tends to accelerate, especially within the world’s major markets such as China and the United States, which are accelerating their support for the development of battery electric vehicles (BEV) to promote domestic economic growth. As automakers and battery manufacturers began to be interested in investing in neighboring countries of Thailand such as Indonesia, Thailand must adjust its policies to accelerate investment promotion in order to gain an advantage over competitors. In addition to supporting investment in various types of electric vehicles, the latest measures of the Board of Investment (BOI) have also expanded the categories of electric vehicle parts to establish a more comprehensive supply chain. The above-mentioned measures are different from the previous strategy of attracting auto manufacturers to establish production bases and then attracting investment from auto parts manufacturers. Instead, a new model has been devised that simultaneously attracts relevant auto parts manufacturers to expand investment in order to accelerate the establishment of a more complete supply chain of electric vehicle parts in the country, which will become a “magnet” for automakers interested in investing in the production of electric vehicles. KResearch believes that the combination of the new measure and the current global automotive manufacturing direction that aims to reduce costs by sharing platforms with more manufacturers and models, as well as using more standardized parts and components, will help improve the efficiency of attracting foreign investment. This will assist in building Thailand into an electric vehicle parts production base with a complete supply chain, thereby increasing Thailand's chances of becoming an electric vehicle manufacturing center in the future. 
         KResearch agrees with the above-mentioned new promotion package because it will help accelerate the establishment of an electric vehicle parts supply chain in Thailand, relying on the correlation between the technology and production process of different models of parts to generate economies of scale, and eventually replacing the existing internal combustion engine parts supply chain whose importance tends to decline in the future. At the same time, by developing into a production base of various important and necessary parts, it will make up for Thailand’s weakness in the production of important raw materials for automotive batteries compared with its competitors such as Indonesia (however, the cost of batteries is likely to continue to decline and thus will reduce the importance of batteries in the future), and become an important advantage for Thailand to gradually become a regional production base for electric vehicles. However, although battery production in Thailand is restricted due to lack of raw materials, the BOI’s new measure is more in line with the above situation and more flexible. If investors intend to invest in the module- or cell-manufacturing process, they will enjoy additional privileges. It is expected that the production of batteries from imported raw materials will help fill the above-mentioned gaps to a certain extent.
         KResearch expects that the promulgation and implementation of new measures to promote investment in electric vehicles will facilitate the production expansion of electric vehicles (including HEV, PHEV and BEV) for domestic sales and export. Electric vehicle production in 2030 is expected to increase from 45,000 in 2020 to 750,000, accounting for 30% of the estimated annual production of 2.5 million vehicles.

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