Late last month, Thailand’s Board of Investment (BoI) approved promotional privileges for manufacturers of green cars including hybrids, plug-in hybrids (PHEVs) and full electric vehicles (EVs). The carrot includes tax holidays of five to eight years, with the intention to make the “Detroit of the East” – big in pick-up truck and small car production – a hub for future green cars.

Passenger cars, pick-up trucks and buses are eligible, with different levels of privilege dished out according to the level of technology, Bangkok Post reports.

Makers of hybrids are entitled to a tariff exemption for imported machinery, while PHEV investment is eligible for a corporate income tax exemption for three years and import tariff exemptions on machinery. PHEV investors who manufacture more than one key EV part will be entitled to an additional year of corporate income tax exemption per piece, but the combined tax exemptions cannot exceed six years.

Meanwhile, EV investment is entitled to five to eight years of corporate tax waivers. EV investors who manufacture more than one key EV part will be entitled to another year of corporate income tax exemption per piece, but the combined tax exemption cannot be over 10 years. Electric-powered buses will be entitled to tariff exemptions for imported machinery and a three-year corporate tax waiver. More EV parts, more years of tax exemption, as long as it doesn’t exceed six years.

The 10 important EV components that come with corporate income tax exemption are batteries, traction motors, battery management services, DC/DC converters, inverters, portable electric vehicle chargers, electrical circuit breakers and EV smart charging systems.

The demand part of the equation is equally as important, if not more, and the Thai government is slashing excise tax for CBU imported green cars to boost domestic demand, which is similar in principle to what Malaysia did for CBU hybrids and EVs a few years ago.

That window, which ended in 2013, saw carmakers take advantage of the tax breaks to offer good value CBU hybrids such as the Toyota Prius, Prius c, Lexus CT200h, Honda Insight, CR-Z, Civic Hybrid and Audi A6 Hybrid, among other models. The Nissan Leaf and Mitsubishi i-MiEV electric cars were also introduced in Malaysia.

Thailand’s temporary two-year plan will see excise tax for CBU hybrids and PHEVs that emit less than 100 g/km of CO2 cut to 5% from 10%, while EVs will attract an excise tax of just 2%. Hybrids and PHEVs with 101-150, 151-200 and over 200 g/km of CO2 emissions will have new excise taxes rates of 10%, 12.5% and 15%, from 20%, 25% and 30% respectively.

Carmakers are taking the news positively. Piengjai Kaewsuwan, VP of Nissan Motor Thailand, said the newly-announced privileges given to makers of EVs are enticing when one factors in benefits such as zero tariffs for CBU imported EVs and an excise tax reduction to stimulate domestic demand.

“The BoI packages for EVs are highly likely to attract new investment, particularly in electric batteries and motor manufacturing locally, as all of these projects are related to EVs and carmakers are now interested in making Thailand their production base,” she said. Nissan, maker of the Leaf, was one of the earliest proponent of EVs.

Thai market leader and hybrid champion Toyota is ready to produce hybrids in Thailand, and will announce its investment plan in the next 12 months, according to Toyota Motor Thailand vice chairman Ninnart Chaitharapinyo.

“Toyota is looking forward to exporting hybrids from Thailand in the future. Toyota’s EV production plan will focus largely on hybrids, as PHEVs and EVs require higher technology,” he said, adding that Toyota is also conducting a feasibility study to establish its own (nickel-metal hydride, NiMH) battery manufacturing facility in the kingdom.

Morikazu Chokki, president and CEO of Mitsubishi Motors Thailand, said his company is also keen on the EV scheme, but the headquarters in Japan will first need to consider and consult with its suppliers before making a decision in 2018. He added that PHEVs seem like the best fit for Thailand now, which lack EV infrastructure such as charging stations.