BANGKOK -- Thailand will raise its excise tax on imported electric vehicles to 35% from the current 10%, as it seeks to promote local production in response to an influx of finished cars from China.

The cabinet on Tuesday approved the plan for battery EVs, with the new tax rate taking effect Jan. 1 next year, according to Industry Minister Varawut Silpa-archa.

"The government prioritizes supply chains and investors who have invested in Thailand, helped develop our auto industry and supported the Thai economy for decades, particularly the Japanese companies," Varawut told reporters after the cabinet meeting.

Pornchai Thiraveja, director general of the excise department, said the tax restructuring aims to promote investment in the local auto industry that will help transform the country into a regional EV production hub.

Thailand is the third-largest auto market in Southeast Asia after Malaysia and Indonesia. As in many other countries, EVs are increasingly penetrating the market in Thailand, led by Chinese brands, as higher oil prices accelerate the shift away from internal combustion engine cars. Passenger EV sales reached 161,532 cars from January through September, accounting for 31% of total sales, according to the Federation of Thai Industries. Meanwhile, EV production in Thailand totaled 70,472 cars over the same period, the federation's data showed, indicating a sizable volume of imports.

The Thai government has been considering the excise tax overhaul because it believes the increase in imported EVs will not help develop local supply chains and create jobs.

Japanese auto assemblers, which primarily focus on hybrids and internal combustion engine cars, have complained the current tax system is unfair and makes locally made cars less competitive. Hybrids assembled in Thailand are subject to excise tax rates of 6% to 15%, while internal combustion engine cars are taxed at a 25% to 35% rate.

According to Commerce Ministry statistics, the value of Thailand's EV imports was about $2.36 billion during the first nine months of 2026, based on a classification for vehicles with only an electric motor for propulsion, with 96% coming from China.

Several Chinese automakers have plants in Thailand, including Great Wall Motor but not all models are produced locally.

Chinese brands benefit from a zero tariff. Under the ASEAN-China trade pact, which took effect in 2010, tariffs on finished autos were scrapped, according to the Thai Finance Ministry, making them competitive on price.

Industry officials and analysts say the new excise tax scheme will help slow the increase in imported cars and support local production. "The tax structure should be a mechanism that helps [the country attract] real investments that create supply chains in the country," said Pimjai Leeissaranukul, chair of the Federation of Thai Industries.

But Rujipan Assarat, an analyst of Kasikorn Research Center, cautions that even with the new excise tax scheme, consumer demand may not be sufficient to boost production due to the country's relatively weak economy "Car production may not rise rapidly, as demand remains low amid a gloomy economic outlook," Rujipan said.