8-8-2024 (BANGKOK) In a strategic move to strengthen its position as Southeast Asia’s automotive manufacturing hub, Thailand has announced a series of attractive tax incentives aimed at fostering joint ventures (JVs) between domestic and international companies in the automotive parts sector. The Board of Investment (BOI) revealed on Thursday that these incentives will apply to manufacturers of components for vehicles utilising all types of propulsion systems, signalling a comprehensive approach to the evolving automotive landscape.
This initiative comes as Thailand, already a significant export base for global automotive giants, seeks to maintain its competitive edge and adapt to the shifting dynamics of the industry. The country has been particularly aggressive in promoting investments in electric vehicles (EVs), offering lucrative incentives to entice major players in the field.
Under the newly approved scheme, both greenfield projects and existing parts manufacturers currently benefiting from promotional privileges can avail of an additional two years of tax exemption, with a maximum cap of eight years. This extended benefit is contingent upon the transformation of existing operations into joint ventures and the submission of applications before the close of 2025.
To qualify for these incentives, new joint ventures must meet specific criteria set by the BOI. A minimum investment of 100 million baht in automotive parts manufacturing is required. Additionally, the JV must be structured as a partnership between a Thai and a foreign company, with the local entity mandated to be at least 60% Thai-owned and contribute no less than 30% of the joint venture’s registered capital.
This move is seen as a calculated effort to not only attract foreign expertise and capital but also to ensure significant local participation and knowledge transfer in the automotive sector. By incentivising collaborations, Thailand aims to create a more robust and innovative automotive ecosystem that can compete on a global scale.
The announcement comes on the heels of a significant investment approval by the BOI. On Wednesday, South Korean automotive giant Hyundai Motor Company received the green light for a 1 billion baht investment to establish an EV and battery assembly facility in Thailand. This development underscores the country’s growing appeal as a destination for electric vehicle manufacturing and aligns with its broader strategy to position itself at the forefront of the automotive industry’s electric revolution.
Industry analysts view these incentives as a timely intervention, given the global shift towards electric and alternative fuel vehicles. By encouraging joint ventures across all propulsion types, Thailand is hedging its bets and ensuring its automotive sector remains versatile and future-proof.
The move has been welcomed by both local and international stakeholders in the automotive industry. Local parts manufacturers see this as an opportunity to upgrade their capabilities and access global markets, while foreign companies view it as a chance to tap into Thailand’s established manufacturing infrastructure and skilled workforce.
