The Excise Department is preparing to restructure tax rates on automobiles to facilitate the transition from internal combustion engine (ICE) vehicles to emerging mobility technologies, including electric and hydrogen-powered vehicles.

The aim is to use excise taxes as a tool to promote sustainability while balancing revenue generation with economic outcomes to improve competitiveness, as stated by Director-General Kulaya Tantitemit.

Excise tax rates on batteries will be adjusted to encourage the use of more efficient batteries. The new tax criteria will be based on energy density (energy per unit of weight) and life cycle (charge-discharge cycles), as explained by Kulaya.

Furthermore, a carbon pricing mechanism will be introduced within the excise tax structure for oil and oil products.

While the excise tax burden on these products will increase, the changes are designed to minimise the impact on the public, according to Ms Kulaya.

The carbon tax is being prepared for submission to the cabinet. The proposed tax rate is set at THB 200 (US$ 6) per tonne of carbon dioxide equivalent, multiplied by the emission factor. As different types of fuels emit varying amounts of carbon, the carbon tax burden will differ depending on the fuel or oil product.

Earlier, the EV Board approved lower tax rates for hybrid and "mild hybrid" vehicles for a period of seven years to assist in the transition from ICE vehicles to electric vehicles (EVs).

The board also decided to restructure excise tax rates for hybrid vehicles, introducing a fixed rate for seven years (2026-2032), replacing the previous policy of incremental tax increases.

Hybrid vehicles are viewed as a transitional technology leading to the eventual adoption of EVs. The board believes Thailand has the capacity to manufacture such vehicles.

The tax measures for mild hybrid vehicles specify that vehicles emitting no more than 100 grammes of CO2 per kilometre will be taxed at a rate of 10% from 2026 to 2032, while vehicles emitting more than 100 grammes will be taxed at 12%.

The tax rates for mild hybrid vehicles are higher than those for other hybrids but lower than those for ICE vehicles.