Among the major elements of CASE, the "E" (Electrification) is the most discussed element to date. Electric vehicles (EVs) are expected to have the largest market impact on the automotive industry in the near future as well as contribute to the transformation in the structure of the global automotive supply chain.
- In depth
Since it would not be an overstatement to say there is already a global consensus to replace internal combustion engine (ICE) vehicles with EVs, it is therefore not a question of when but how the new ecosystem of the automotive industry will be shaped.
In our fifth article of the CASE Automotive series, we will focus on how EVs will change the industry landscape and how the fast-developing EV trend will find its right place in Thailand.
How the world agreed to combat climate change with EVs
The obvious driver behind this phenomenal change is environmental awareness. This is because the adoption of EV is considered a potential solution to address climate change and air pollution issues across the globe.
The Paris Agreement, one of the main legally binding treaties on climate change, sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C. It also aims to strengthen countries' abilities to deal with the impacts of climate change and support them in their efforts. The Paris Agreement signatories, including Thailand, are committed and collaborating to achieve this goal. Adoption and development of EV technologies along with improvement in power generation efficiency are becoming effective approaches.
EVs directly help reduce air pollution problems in urban and industry-concentrated areas. According to the World Health Organization (WHO), in 2016, 91% of the world's population was living in places where the WHO air quality guideline levels were not met. Outdoor air pollution in both cities and rural areas was estimated to cause more than 4 million premature deaths. A shift towards zero-emission EVs (ZEVs) will contribute to cleaner transport which is a key solution for better air quality.
European countries, especially the Scandinavian countries, are taking the lead in environmental actions and have therefore been very active in EV related activities in terms of government policies. Norway, for example, announced a national policy stating that only EVs or hybrid vehicles will be allowed for new car sales in the country from 2025 onwards. The UK and France are targeting the same goal of new ZEV sales in 2040 and have already pushed the ratio of EV use to more than 10% in 2020.
As for Thailand, solving air pollution issues has become one of the major social concerns and is a top priority of the government. The awareness of the global shift to EVs as a solution to improve the environment has been mostly welcomed by Thai citizens.
How Thailand prepares for EV transformation
Transforming from an ICE vehicle to an EV manufacturing country is not an easy task. Considering that currently around half of the vehicles produced in Thailand are supplied to the domestic market, it is also crucial to build up domestic ecosystems to support both demand and supply of EVs.
Since the announcement of the national EV roadmap earlier this year (see previous newsletter), the government has been working hard to roll out a pragmatic masterplan with the ultimate goal of transforming the country into an EV manufacturing country and to secure the future of one of the nation's most important industries. The masterplan will cover not only EVs but also development plans for battery manufacturing and supplies, supporting infrastructure, including charging stations and power grid management, and the development of related laws and regulations to enable comprehensive and integrated implementation. Note that EVs in the masterplan also cover various types of vehicles including motorcycles, tricycles, buses, trucks and ferry boats.
On 12 May 2021, the chairman of the National EV Policy Commission ("Commission") announced that, in order to transform Thailand into a low-carbon society, ZEVs will contribute to at least 30% of total domestic vehicle production by 2030 (the so-called 30/30 policy) and Thailand will be equipped with 12,000 public fast-charging stations by that time. To promote the use of EVs, the Commission is considering both tax and non-tax incentives for manufacturers and consumers. As to the current goal, by 2030 Thailand will annually produce 725,000 electric passenger cars and pick-up trucks and 675,000 electric motorcycles.
How laws and regulations will shape Thailand's EV landscape
While the Board of Investment of Thailand has already granted investment promotion incentives to some EVs and EV parts manufacturers, a number of tasks lie ahead in developing the related legal framework.
In order to achieve the transformation goal, several EV-related laws and regulations, both the existing ones and those being contemplated, require careful review and revision to provide clear policies and timeframes of the transformation to gain investors' confidence, and to accommodate all stakeholders, especially domestic EV and EV battery manufacturers, and EV-related infrastructure and service providers in building an EV ecosystem. Below are some key aspects to be considered.
- Compatibility: As the compatibility among several types of EVs and EV parts may differ from one region to another, official standards, including industrial standards regarding specifications, efficiency, test categories and other major characteristics of EVs and EV batteries, must provide the scope wide enough to cover all types of EVs to allow market access and an extensive variety of new EV technologies.
- Existing domestic manufacturers: The incentive schemes should not only aim to attract new EV players but also be available to existing domestic manufacturers who have potential and are committed to transform themselves to the new ecosystem, including support for training of the Thai workforce in the automotive industry.
- EV infrastructure-related regulations: These must provide a clear policy which addresses investors' major concerns, including licensing for battery charging/exchange stations, pricing of electricity for EVs, and station zoning, to gain their confidence in creating a viable business plan with sound return. In addition, given that charging stations can also be installed at residences or buildings, the laws and regulations regarding building control and condominiums must also be revised to facilitate the expansion of EV use.
- Power Development Plan: As part of the national agenda, the Power Development Plan must be reviewed and revised to reflect the power needs for EVs to ensure that Thailand's resource management is ready for the transformation.
- EV battery recycling: To complete the product cycle of EVs and encourage sustainability of the EV ecosystem, the policy and regulations regarding EV dismantlement and EV battery recycling should be developed along with legal framework to facilitate second-life use of degraded EV batteries as energy storage systems.
- ICE vehicles: To boost the domestic demand for EVs and gradually restrict the use of ICE vehicles, regulations concerning registration of ICE vehicles as well as schemes on excise tax and duty for EVs and ICE vehicles should be revisited and restructured.
How Thailand's market is doing so far
With plans materializing and expectations of exponential growth in Thailand's EV market, the more tasks which need to be done to transform Thailand into an EV manufacturing country, the more opportunities await. Adding up the positive responses from both the public and private sector bodies, Thailand now holds a good position to drive the future of the EV industry. The journey will take time but significant steps have already been made.
Once all EV elements are in place, we expect that Thailand will be positioned as one of the world's busiest EV manufacturing hubs, an exciting EV market and a leading contributor to global environment solutions.