Thailand’s Bold Move on PHEV Tax Breaks - Malaysia?

There has been growing speculation about whether the Malaysian government is committed to supporting xEV, which includes not just EVs but also PHEVs and hybrids.

This discussion has intensified as the Completely Built-Up (CBU) EV tariff exemption is set to end this year, while the Completely Knocked Down (CKD) EV tariff exemption is scheduled to expire in 2027.

Despite the noise, three months into the year, there has been little indication of a concrete plan to expand incentives beyond fully electric vehicles.

In contrast, Thailand is aggressively pushing forward with its electrification strategy.

The Thai Finance Ministry is set to propose new support measures for plug-in hybrid electric vehicles (PHEVs) to the cabinet by April.

According to Deputy Finance Minister Paopoom Rojanasakul, these measures are expected to take effect on Jan 1, 2026.

The new PHEV support measures will introduce a separate tax structure for PHEVs and battery electric vehicles (EVs).

Instead of being based on carbon emissions, the tax rate for PHEVs will depend on how far the vehicle can travel on a full charge.

Vehicles with a longer electric range will be taxed at a lower rate, while those with a shorter range will face higher taxes.

Another key change is the removal of the current fuel tank capacity restriction. At present, PHEVs are limited to a maximum tank size of 45 litres, but this restriction will be lifted.

Further details, including the specific tax rates, will be announced once the cabinet approves the measures.

Under the existing structure, PHEVs that can travel more than 80 kilometres per electric power alone are taxed at 5%, while those with a shorter range are taxed at 10%.

Mr. Paopoom emphasized that supporting PHEVs is essential for sustaining Thailand’s automobile manufacturing industry.

The industry has long been based on internal combustion engine vehicles, and PHEVs serve as an important transitional step before the full shift to battery EVs.

The Excise Department is also revising the tax structure for batteries. Currently, all batteries are taxed at a flat rate of 8%, but a new tiered system will be introduced.

Batteries with longer life cycles per charge will face lower taxes, while disposable batteries will be taxed at a higher rate.

The new structure will also consider the battery’s energy capacity relative to its weight, with more efficient batteries benefiting from lower tax rates.

Additionally, in order to promote CKD production, from next year, EV importers benefiting from government incentives will be required to manufacture EVs domestically in Thailand.

This policy aims to balance imports with local production and is expected to result in around 100,000 domestically produced EVs in 2025.

Now while Malaysia debates its xEV strategy, Thailand has already taken decisive steps to expand its tax incentives for electrified vehicles.

Notably, Thailand’s plan does not extend PHEV incentives indefinitely, signaling a clear preference for fully electric vehicles in the long run.

As discussions continue in Malaysia, Thailand's proactive approach stands in stark contrast, highlighting the difference in policy direction between the two neighboring nations.

Maybe its high time Malaysia take a page off Thailand’s xEV playbook as we personally find this new proposed PHEV tax structure detailed above simply brilliant and implementing something similar could fuel Malaysia’s overall EV transition plan.   

Source: BangkokPost