The electric vehicle (EV) market ecosystem is huge and requires significant investment. While the market forecast is promising, there are many existing players still waiting for the right time to invest, let alone new players considering entering this emerging market. One of the main drivers for activating the buying motivation of consumers, the main driver of moving the electric vehicle market to the next stage, involves financial incentives. In this article, we will discuss how the incentive programs for electric vehicles (i.e. this zone are.
A global look at financial incentive programs for electric vehicles
As discussed in our previous article, as the global trend towards an EV company has a long history with environmental awareness, the current trend is for zero emission EVs (ZEVs), which are basically powered by batteries – often referred to as EV to battery (BEV) – are more likely to be incentivized than other types of EVs (plug-in hybrid EVs and hybrid EVs), which tend to receive fewer financial incentives under more conditions (e.g. maximum emission threshold of CO2).
While many studies have suggested that financial incentives correlate well with the penetration rate of the electric vehicle market, some argue that there are better metrics (e.g. higher density of charging stations). Nonetheless, government financial incentive programs still give a strong and clear message to consumers and ensure competitive prices for the vehicles promoted.
In addition to tax incentives and subsidies, some countries also offer so-called “physical incentives for electric vehicles,” which are non-tax privileges for users of electric vehicles. These include, in particular, toll and parking fee exemptions, and lane priorities. Once the adoption rate of electric vehicles gets higher and financial incentives start to wane, granting other convenient use privileges, such as priority booking at charging stations, may also help. stimulate sales of new electric vehicles.
We have outlined some historical and recent trends in EV incentives below:
- In more than 10 European countries, including Norway, Sweden, France, the United Kingdom and the Netherlands, incentives for electric vehicles and electric vehicle charging facilities exist in the form of tax benefits or subsidies. Specifically, Norway has long encouraged electric vehicles and has now become the world’s largest user of electric vehicles with an electric vehicle market share of over 55%. The country has been a destination of choice for many global manufacturers of electric vehicles, for its generous and long-term tax regime for electric vehicles. For two decades, Norway waived $ 3 billion in tax subsidies for electric vehicles.
- In the United States, the “Clean Energy for America” bill is underway. The bill will consolidate many existing incentives into three categories, namely clean electricity, clean transportation and energy efficiency. Under the current proposal, newly qualified electric vehicles will receive tax credits which can be higher if the vehicles are manufactured in the country and even higher if the domestic manufacturer has a union.
- Japan’s Ministry of Economy, Trade and Industry plans to continue and double this year’s subsidy amount for “clean energy EV” buyers in fiscal year 2022. The program s ‘also applies to electric vehicle charging facilities, but does not provide a subsidy for non-plugged vehicles such as hybrid electric vehicles.
In contrast, China tends to reduce its incentives for EVs. The original plan was to withdraw subsidies to EVs at the end of last year. However, this has been adjusted to a gradual reduction in subsidies in order to offset the impact of COVID-19 on the domestic electric vehicle market. While new electric vehicles in China will receive 20% less subsidies, this proves that even at the maturing stage of the electric vehicle market, financial incentives remain a good tool to keep the industry growing.
The Electric Vehicle Incentive Program in Thailand
Thailand’s Board of Investment (BOI) has been promoting the electric vehicle industries for some time and is now preparing to extend incentive coverage to BEV platforms and two-wheeled electric vehicles (see our related article). BOI tax incentives normally involve exemption and reduction of corporation tax as well as exemption from import duties of raw materials for a certain period under certain conditions. However, for electric vehicles, in order to strengthen the competitiveness of the market, the excise service applied an attractive excise tax rate of 0% from January 1, 2020 to December 31, 2022 and of 2% from January 1, 2023 to January 31, 2020. December 2025, to electric vehicles. passenger vehicles whose number of seats does not exceed 10 seats which are promoted by the BOI. Even without the promotion of BOI, electric passenger cars still have a relatively low excise rate of 8%, compared to traditional motor passenger cars, which have a normal excise rate between 25 and 40%.
In addition to the above, the tax regime is expected to be even more exciting when the Thai government rolls out its new tax and non-tax regimes for electric vehicles, which are expected to be announced very soon, according to the statement from the head of the National Policy Committee. electric vehicles. . For context, Thailand is among more than 180 countries committed to taking action on climate change and is working to transform the country into a low carbon society. Increasing the adoption of domestic electric vehicles is one of the main national goals and is in line with this global commitment. Injecting financial incentives for electric vehicles can potentially yield significant results in terms of reducing emissions.
As the EV market cannot thrive without sound infrastructure, we anticipate that the tax benefits will also be extended to businesses and activities related to EV infrastructure, including charging stations, installation of home chargers, as well as tariffs for EV infrastructure. competitive electricity. The higher density of electric vehicle charging points will make it easier for consumers to tackle range anxiety and should translate into greater confidence in owning this exciting and environmentally friendly technology. In addition, to encourage a circular economy, activities that help close the product cycle, including electric vehicle and battery recycling companies, should also be another area to be endowed with attractive incentives.
As the transformation of electric vehicles comes at a very high cost, the Thai government needs to better utilize the budget of electric vehicle policy for profitability. It remains to be seen how Thailand will position itself in the EV ecosystem and how policies translate into actual tax regimes.
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