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In brief

The ecosystem of the electric vehicle (EV) market is huge and requires significant investment. While the market forecast is bright, many existing players are still waiting for the right time to invest, not to mention new players considering entering into this emerging market. One of the key drivers to activate the consumers’ buying motivation, the primary factor for advancement of the EV market to the next stage, involves financial incentives. In this article, we will discuss how EV incentive schemes (i.e., tax benefits and subsidy system) can play vital roles in propelling the development of the EV market around the globe and how Thailand can take stock from these developments and what its current policies in this area are.

In depth

A global look at EV financial incentive schemes

As discussed in our previous article, as the global trend towards an EV society has a long history with environmental awareness, the current trend is that zero-emission EVs (ZEVs), which are basically powered by batteries — often called battery EVs (BEVs) — are more likely to be incentivized than the other types of EVs (plug-in hybrid EVs and hybrid EVs), which tend to receive less financial incentives under more conditions (e.g., maximum CO2 emission threshold).

While many studies have suggested that financial incentives have a good correlation with the EV market penetration rate, some argue that there are better measures (e.g., the density of charging stations matter more). Nonetheless, the government’s financial incentive schemes still give a strong and clear message to the consumers and provide price competitiveness for the promoted vehicles.

In addition to tax incentives and subsidies, some countries also provide the so-called “physical EV incentives” which are non-tax privileges to the EV users. These include toll fee and parking fee waivers, and traffic lane priorities. Once the EV adoption rate becomes higher and financial incentives begin to fade out, granting some other privileges on practical use, such as priority reservation at charging stations, may also help boost new EV sales.

We have outlined some historical and recent trends regarding EV incentives below:

  • In more than 10 European countries, notably Norway, Sweden, France, the UK and the Netherlands, incentives for EVs and EV charging facilities exist as tax benefits or subsidies. Specifically, Norway has long incentivized EVs and has now become the top global EV adopter with the EV market share of more than 55%. The country has been a pinpoint destination of many global EV makers, for its generous and long-term EV tax scheme. For two decades, Norway has foregone USD 3 billion on EV tax subsidies.
  • In the US, the “Clean Energy for America” bill is now underway. The bill will consolidate many existing incentives into three categories, namely clean electricity, clean transportation and energy efficiency. Under the current proposal, newly qualified EVs will receive tax credits which can be more if the vehicles are manufactured domestically and even higher if the domestic manufacturer has a labour union.
  • Japan’s Ministry of Economy, Trade and Industry plans to continue and double this year’s subsidy amount for “clean energy EV” buyers in the fiscal year 2022. The scheme also applies to EV charging facilities but does not provide subsidy for no-plug vehicles such as hybrid EVs.

In contrast, China tends to reduce its EV incentives. The initial plan was to withdraw EV subsidies at the end of last year. However, this has been adjusted to a gradual reduction of the subsidies in order to offset the impact of COVID-19 on the domestic EV market. While the new EVs in China will receive 20% less subsidy, this proves that even in the maturing stage of the EV market, financial incentives remain a good tool to keep the industry growing.

Thailand’s EV incentives scheme

Thailand’s Board of Investment (BOI) has been promoting EV industries for some time and is now preparing to expand the coverage of incentives to BEV platforms and two-wheel EVs (see our related article). The BOI tax incentives normally involve exemption and reduction of corporate income tax as well as exemption of import duties of the raw materials for a certain period with certain conditions. However, for EVs, in order to boost the market competitiveness, the Excise Department has been applying an attractive excise tax rate of 0% during 1 January 2020 to 31 December 2022 and 2% during 1 January 2023 to 31 December 2025, to electric powered passenger vehicles with seating not exceeding 10 seats which are promoted by the BOI. Even without the BOI promotion, electric powered passenger cars still have a relatively low excise rate of 8%, when compared with traditional engine passenger cars, of which the normal excise rate ranges between 25-40%.

In addition to the above, the tax scheme should be even more exciting when the Thai government rolls out its new EV tax and non-tax schemes which are scheduled to be announced very soon, according to the statement from the head of National EV Policy Committee. For background, Thailand is among over 180 nations committed to take climate change action and endeavors to transform the country to a low carbon society. Increase in domestic EV adoption is one of the national main goals and is in line with this global commitment. Injecting EV financial incentives can eventually return significant results in emission reduction.

As the EV market cannot thrive without healthy infrastructures, we expect tax benefits to also be extended to EV infrastructure-related businesses and activities, including charging stations, installation of household chargers, as well as competitive electricity rates. The higher density of EV charging points will provide consumers with more ease against driving-range anxiety and should result in more confidence to own this exciting and environmentally-friendly technology. Additionally, to encourage a circular economy, activities which help close the product cycle, including EV and battery recycle businesses, should be another area to equip with attractive incentives as well.

As EV transformation comes with a very high cost, the Thai government must best exert the EV policy budget for cost-effectiveness. It remains to be seen how Thailand will be positioned in the EV ecosystem, and how the policies are translated into the actual tax schemes.


Suriyong Tungsuwan joined Baker McKenzie in 1982 and became a partner in 1993. He is active in the areas of corporate and commercial law, mergers and acquisitions, real estate and property development, labour, employment, executive transfers, and trade regulations and customs.


Noriko Sakamoto joined Baker McKenzie in 2008. She is active in the Mergers & Acquisitions Practice Group and Pharmaceuticals & Healthcare Industry Group. She also actively assists Japanese clients as a core member of the Japan Advisory Group.


Benedict Yong is a Senior Consultant - Japan Advisory Group Manager in Baker McKenzie, Bangkok office.


Varutt Kittichungchit is a Legal Professional in Baker McKenzie, Bangkok office.

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