J.P. Morgan: Thailand raises excise tax on imported EVs as Chinese automakers accelerate localization

What changes under Thailand’s new tax rates?

Citing Reuters, the report says Thailand’s cabinet approved an increase in the excise tax on affected imported battery electric vehicles from 10% to 35% and on range-extended electric vehicles from 15% to 35%, effective 1 January 2027. The measures target imported EVs that do not meet local production or component sourcing requirements.
The 35% rate is higher than the 30% scenario previously discussed by JPMorgan. The bank expects the higher tax burden to weaken the competitiveness of affected imported models and spur Chinese automakers to accelerate localization.
The policy continues Thailand’s shift from subsidizing imported EVs toward encouraging local manufacturing: EV 3.5 requires manufacturers receiving incentives to produce locally at volumes equal to 2 times and 3 times their import volumes in 2026 and 2027, respectively.

JPMorgan believes BYD, SAIC, Great Wall Motor and GAC Aion already have manufacturing bases in Thailand and are better positioned to cushion the tax increase as their factories ramp up production. The actual impact will still depend on the share of affected imported models at each automaker and the speed of its local production ramp-up.
In the first nine months of 2026, BYD’s vehicle exports from China to Thailand fell 18% year on year, which the bank believes reflects a shift of production to Thailand. Over the same period, total Chinese vehicle exports to Thailand still rose 34% year on year, with export trends differing among companies.
The detailed rules for applying the tax will affect how much the impact can be cushioned, particularly how imports of complete vehicles by automakers with existing Thai factories are treated and how knock-down assembly is distinguished from full-process manufacturing.

Automakers with existing local production and supplier networks have an advantage; brands reliant on imports may accelerate knock-down assembly or full-process manufacturing. The Thai government is also considering tax incentives for companies making new investments and using high-value local components.
JPMorgan believes the ultimate impact on profitability depends on whether automakers can localize without significantly increasing costs; even with more geographically diversified overseas production, localization could still depress short-term margins.
Before the tax rates take effect, shipments may be expedited in the fourth quarter of 2026, followed by a potential weakening in imports of complete vehicles; the pace of local factory ramp-ups and new investment will also affect the outcome.

Thailand accounts for about 3% of Chinese vehicle exports. JPMorgan believes the Thai measures alone are unlikely to materially change its industry earnings forecasts, but it is more concerned about the effect of accumulated overseas trade and non-tariff barriers on export growth.
The bank is watching whether the UK imposes additional tariffs on Chinese new-energy vehicles at the EU-UK summit on 20 November, and the European Parliament’s vote in December on the framework for the Industrial Accelerator Act. According to the report, the UK accounts for about 6% of China’s vehicle exports year to date; stricter European manufacturing requirements could affect Chinese automakers’ eligibility for local incentives and market access.
JPMorgan remains cautious on China’s auto industry heading into 2027 and maintains its Overweight rating on Chery Automobile and Underweight rating on BYD’s A-shares.