Thailand’s Automotive Industry: A Guide for Foreign Investors

Posted by Written by Ayman Falak Medina Reading Time: 3 minutes

Thailand has long been regarded as the automotive hub of Southeast Asia, playing a crucial role in the region’s manufacturing and export activities. The industry is valued at US$12.67 billion, with Thailand ranking 10th globally in vehicle production. In 2023, 2.55 million units were manufactured, a figure expected to reach 2.98 million by 2028, reflecting a 2.5 percent annual growth rate.

With a strong government commitment to advancing electric vehicle (EV) production and expanding industrial capabilities, Thailand presents a lucrative opportunity for foreign investors looking to establish manufacturing bases, tap into regional supply chains, and leverage government incentives to gain a competitive edge in the ASEAN market.

A decade of steady growth and market expansion

Over the past decade, Thailand’s automotive sector has grown at an average annual rate of 3.3 percent. Much of this expansion has been driven by the production of one-ton pickup trucks and passenger cars, both of which continue to be dominant segments. The government has outlined ambitious goals, including a push toward greater EV production by 2030.

Key players and industry landscape

The Thai automotive industry is home to major domestic and international manufacturers, including Toyota, Honda, Mitsubishi, and Isuzu. The local supply chain is robust, with around 720 Tier 1 suppliers and over 1,100 Tier 2 and Tier 3 suppliers. Localization remains a priority, with 80 percent of vehicle components sourced locally.

Production in 2024 totaled 1,841,663 units, with 688,633 units exported and 399,611 units sold domestically. Thailand’s top export destinations include the United States (18.3 percent), China (11.7 percent), and Japan (7.8 percent), reinforcing its strong global presence.

The economic significance of the automotive industry

The automotive sector contributes approximately 10 to 11 percent of Thailand’s GDP, making it a cornerstone of the country’s industrial economy. It also provides direct employment to around 850,000 people, with an additional 1.5 million indirect jobs supported by the industry. The sector’s contributions extend beyond employment, driving demand for related industries such as steel, rubber, plastics, and electronics, which are integral to automotive manufacturing.

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Additionally, Thailand’s position as a global automotive exporter generates significant foreign exchange earnings, with automotive exports contributing over 40 percent of total industrial exports. The industry’s sustained growth is further supported by the expansion of research and development (R&D) centers focusing on next-generation vehicles, including electric vehicles and hybrid models.

Government incentives and investment policies

The Thailand Board of Investment (BOI) has introduced numerous incentives to attract foreign investment in the automotive sector:

  • Corporate income tax exemption: Up to 15 years for qualifying projects.
  • Import duty exemption: This applies to machinery and raw materials used for export-oriented production.
  • R&D and innovation incentives: Special incentives for projects involving advanced technology, research, and development, including support for EV production.

Special economic zones and industrial estates

Thailand has developed several special economic zones and industrial estates to support automotive manufacturing. The Eastern Economic Corridor (EEC) is the premier hub, offering advanced infrastructure, strategic connectivity, and access to global supply chains. It features dedicated industrial clusters, research centers, and incentives for high-tech automotive manufacturing, particularly for EVs. Further, WHA Industrial Estates in Rayong and Chon Buri provide tailored support services for automakers, including ready-built factories, logistics hubs, and supplier networks that cater to both domestic production and exports.

The drive toward electric vehicles

The Thai government is strongly promoting EV production, offering substantial incentives such as:

  • Subsidies: Up to 100,000 baht (US$2,947) for EVs with batteries over 50 kWh.
  • Excise tax reduction: Reduced from 8 percent to 2 percent for EVs.
  • Customs tax reduction: Up to 40 percent for imported EVs.
  • Local production mandates: Manufacturers must produce two EVs locally for every imported EV to qualify for incentives.

Thailand aims for 30 percent of total vehicle production to be electric vehicles by 2030, translating to approximately 725,000 electric cars and 675,000 electric motorcycles annually.

Supply chain and quality standards

Thailand’s automotive industry is characterized by high localization rates and a well-developed supplier network, making it a key player in global automotive production. Over 1,500 manufacturers are ISO-certified, ensuring compliance with global quality and safety standards. The country’s strong supplier network supports both internal combustion engine (ICE) vehicles and electric vehicles, fostering a dynamic ecosystem that attracts major international automakers.

Export strength and global market access

Thailand’s top vehicle export destinations in 2024 include:

  • United States: 18.3 percent
  • China: 11.7 percent
  • Japan: 7.8 percent
  • Australia: 4.1 percent
  • Malaysia: 4.1 percent
  • India: 3.9 percent

The country benefits from multiple free trade agreements, including the Regional Comprehensive Economic Partnership (RCEP) and ASEAN-Japan Economic Partnership Agreement (JTEPA), which provide tariff advantages for Thai-made vehicles in global markets.

Outlook for Thailand’s automotive industry

The Thai government has set ambitious targets for 2030, focusing on transitioning toward cleaner and more advanced automotive technologies. Foreign investment is expected to rise, particularly in the EV and green technology sectors, driven by increasing government incentives and international interest. Moreover, the compound annual growth rate for Thailand’s automotive sector is forecast at 2.5 percent over the next decade, reinforcing the country’s long-term commitment to maintaining its position as a leading automotive hub in the region.

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