Finance Ministry Moves to Reward Domestic Car Production
Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas has announced plans to rewrite how cars are taxed, with excise rates expected to fall for vehicles built domestically and rise for fully imported models from carmakers with no local factory. "This would kill several birds with one stone by supporting domestic production," Ekniti said, warning that leaving the current gaps in place could push manufacturers to relocate to neighbouring countries. The lower rates would apply across petrol and diesel cars, plug-in hybrids and battery electric vehicles, and to qualify, automakers would need to have invested in local factories, sourced locally made raw materials or parts, and built vehicles domestically for export.
The Finance Ministry wants the details finalised by September 2026, with new rates in force before the end of the year. The change can move quickly because it goes through a ministerial regulation under the Excise Tax Act, a route that does not require a parliamentary vote. Finance Ministry permanent secretary Lavaron Sangsnit and excise department director-general Pornchai Theeravet have been tasked with drafting the new structure, though no specific rates have been published yet and the ministry has not said how much revenue it expects to gain or lose.
The overhaul comes as Indonesia has been trying to persuade Toyota to shift production there, having already landed a large investment from Hyundai. The kingdom has served as the region's car manufacturing base for decades, and losing an assembly hub of that scale would risk taking supplier jobs with it. The proposed tax structure is designed to eliminate disparities that currently give vehicles imported under free trade agreements a price advantage over locally manufactured cars, a gap officials say has made it harder to justify continued investment in domestic plants.
The plan follows related efforts this year to keep automakers anchored locally, including incentives tied to local supply chains for electric and hybrid vehicles. Industry watchers say the ministry's ability to move through regulation rather than legislation could allow the new rates to take effect well before the 2026 model year ends, giving manufacturers clarity as they plan investment for 2027.
