Tesla/Thailand: tax breaks electrify local car market
Tesla’s entry into Thailand is perfectly timed. The south-east Asian country is on the cusp of becoming a new source of growth for both the US electric carmaker and its global peers. Toyota’s decades-long dominance over the local vehicle market is nearing an end.
Tesla launched Model 3 and Model Y in Thailand at an unexpectedly low starting price of Bt1.75mn ($50,300) this week. Chinese rival BYD has already started selling vehicles in the country and is building a production plant there, its first outside China.
Both moves come ahead of the peak car shopping season at the end of the year. High fuel prices should give electric car sales a fresh boost this year.
Thailand is already south-east Asia’s second-largest auto market. The industry accounts for about 12 per cent of its economy.
Until now, however, auto sales have been dominated by pick-up trucks, which account for more than 40 per cent of new vehicle sales. Toyota models make up a third of all vehicles in the country. This is not because of brand loyalty or particular love for trucks. Thailand’s excise tax on pick-up trucks is as low as 3 per cent. For passenger cars, it ranges as high as 50 per cent. There are also tax breaks for companies that make 40 per cent of car parts locally. Toyota’s production lines in Thailand have given it an advantage over rival sellers.
But Toyota’s slow rollout of electric cars has left a gap for new entrants to fill. Unlike in China, South Korea and Japan, there is little local EV competition either. Only one local carmaker, Thai Rung Union Car, specialises in assembly and auto parts while making its own Thai Rung brand car.
Expect more companies to move production to Thailand to take advantage of tax breaks. That should boost related local stocks, particularly parts makers such as Thai Stanley Electric and Aapico Hitech. Tesla’s move is about to supercharge the market.
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