Ten Thai automotive and auto parts associations have warned that EV adoption is putting pressure on domestic production and that the country’s automotive industry could face a crisis. According to the industry groups, Thai manufacturers are struggling to compete with low-cost, zero-tariff EV imports from China, while local parts suppliers are seeing orders decline.
The associations, which represent more than 1,500 member companies, said in a letter to the government that the industry could face a major shock in 2027, when the current incentive scheme designed to support EV production is scheduled to end. They called on the government to review the EV policy before the incentives expire and to introduce urgent measures to support the industry.
Their proposals include tax reforms to favor EVs produced in Thailand, linking import quotas with domestic production and technology transfer, strengthening local content requirements, promoting the use of Thai-made parts, improving access to raw materials, and tightening rules of origin and technology transfer requirements.
Under Thailand’s EV 3.5 scheme, manufacturers are required to produce two EVs locally for every EV imported in 2026, and three EVs locally for every EV imported in 2027. The Thai government has since adjusted the rules so that EVs produced in Thailand for export can also count toward these production requirements, in response to weak domestic demand and the risk of oversupply.
Source: Reuters / Automotive Logistics / Thailand Board of Investment
PSR Analysis: The issue is not simply that EV sales are increasing in Thailand. The more important point is that Thailand’s EV policy is moving from the demand-creation stage to a more difficult question: whether that demand can be absorbed into the domestic industrial base.
Thailand’s policy was designed to first build the EV market through imports and subsidies and then require manufacturers to localize production. That logic is clear. But if domestic demand remains weak while production obligations increase, manufacturers may end up producing EVs in Thailand without a sufficiently large local market to absorb them. That would raise the risk of oversupply, price competition, and lower plant utilization.
This is why the government’s decision to allow exported EVs to count toward production requirements matters. It suggests that Thailand’s EV strategy cannot rely on domestic sales alone. The next question is not just how many EVs are sold in Thailand, but where Thai-made EVs can be sold, and how much of that production can be linked to local parts, local capability, and technology transfer.
The pressure on existing suppliers is also more complicated than the familiar point that EVs use fewer parts than ICE vehicles. That is true, and ICE-related suppliers will inevitably face pressure. But the deeper issue is that if the EV market grows mainly through imports, higher sales volumes will not necessarily create more work for Thai suppliers. If batteries, motors, inverters, and electronic components remain largely imported, Thailand’s EV market can grow without significantly deepening the local supply chain.
In that sense, 2027 may become less of an incentive-expiry date and more of a sorting point for the Thai EV market. Manufacturers with scale, export channels, distribution networks, financing capacity, and battery sourcing strength will be better positioned. Brands that depend mainly on domestic sales, or cannot absorb the cost of local production, may come under pressure.
This matters for Japanese OEMs and suppliers as well. Thailand has long been the core ASEAN production base for Japanese automakers, but that position will not automatically carry over into the EV era. Japanese companies now need to decide how to reuse the production base they built around ICE vehicles in a market where the competitive rules are being rewritten by batteries, electronics, cost, and speed.
Thailand’s case also carries a wider lesson for Southeast Asia. Expanding EV sales and building an EV industry are not the same thing. Thailand’s ability to become an ASEAN EV hub will depend less on headline EV sales volume and more on whether EV demand can be converted into domestic production, exports, local sourcing, and technology transfer. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, at Power Systems Research
