After Thailand's "Policy Shift", Where is the Next Stop for Chinese Cars Going Global?

The summer of 2026 seemed unusually hot, but what Chinese car brands felt in the Thai market was instead a sudden chill.

On August 7, Thai Deputy Prime Minister and Minister of Finance Ekniti Nitithanprapas publicly stated that the Ministry of Finance is studying lowering the consumption tax rate for car companies setting up factories in Thailand and using local supply chain parts. The plan aims to complete detailed review and submit to the cabinet by the end of September 2026.

Pure imported vehicles without local manufacturing will continue to bear higher consumption taxes. The Ministry of Finance has instructed the Tax Department to urgently review and redesign the current automotive consumption tax structure, covering fuel vehicles, hybrid vehicles, and electric vehicles. Ekniti clearly stated, "The core of the policy is to allow automotive manufacturers who truly invest in Thailand, set up production bases, and create jobs to receive more reasonable treatment under the tax system."

Multiple Thai media outlets revealed that the Ministry of Finance plans to widen the consumption tax gap for imported electric vehicles to 30% to 50%. The policy logic is already very clear: Car companies investing and setting up factories in Thailand in the future, and using local parts, will enjoy tax incentives; car companies that only import complete vehicles without investing in local production will face higher consumption taxes.

As early as May, ten Thai automotive and parts industry organizations and associations jointly submitted 8 urgent policy recommendations to the government. The core demand is one: raise the consumption tax on imported complete electric vehicles (CBU) from the current 10% to at least 32%. The Thailand Automotive Industries Federation even suggested an appropriate tax rate increase of 30% to 50%. The alliance is led by the Thailand Electric Vehicle Association (EVAT), with 10 industry organizations including the Thailand Auto Parts Manufacturers Association (TAPMA) participating, representing over 1500 enterprises.

Under Thailand's current policy, the consumption tax for locally produced assembled (CKD) electric vehicles is only 2%, while the consumption tax for imported complete vehicles (CBU) is 10%. The difference is 8 percentage points. However, what the industry association wants is to widen this gap to 30 percentage points. That is to say, the consumption tax for imported electric vehicles needs to be pulled up from 10% directly to over 32%. With one in and one out, the gap is huge.

According to Thai industry associations, electric vehicles manufactured in China and imported to Thailand with zero tariffs have significant cost advantages compared to locally produced models — the cost of producing one electric vehicle in Thailand is about 30% to 40% higher than importing directly from China.

In other words, Chinese electric vehicles sell cheaply in Thailand not because Chinese brands are "dumping", but because the production cost is indeed low. So now what Thailand needs to do is use extremely high taxes to flatten this 30% to 40% cost advantage.

And adding to the continuous reduction of Thailand's new energy vehicle subsidies, pure electric vehicles with battery capacity over 50kWh could receive 100,000 Thai Baht cash subsidies in 2024, only 75,000 in 2025, and shrank to 50,000 in 2026 — the comprehensive cost increase for all imported electric vehicles may be between 15% and 30%.

Importers estimate, if the consumption tax is adjusted to 32%, retail prices will rise by at least 25% to 30%. Entry-level electric vehicles will be more expensive by over 100,000 Thai Baht at the terminal price because of this. The three words "cost-performance ratio" may be completely out of reach for Chinese imported electric vehicles.

For brands like BYD that have already built factories locally, the impact of the new policy is limited, but for new forces that still rely on complete vehicle exports, this is nothing short of a devastating disaster.

Chinese Brands Sweep Thailand

In 2021, the market share of Chinese brands in Thailand was only 4%. Japanese brands ruled this market for over 60 years, with market share long-term approaching 90%. Thailand is the "back garden" for Japanese cars. Toyota, Honda, and Isuzu dealerships are spread across every province, with maintenance outlets dense enough that consumers hardly feel the "burden of buying a car".

The turning point occurred in 2022. At that time, the Thai government launched the EV3.0 new energy incentive policy, offering up to 150,000 Thai Baht subsidies for buying electric vehicles, reducing consumption tax from 8% directly to 2%. Chinese car companies seized this window.

In 2025, Chinese car sales in Thailand exceeded 100,000 for the first time, reaching 134,400 units, a year-on-year increase of 81.4%, with market share rising to 22.2%. BYD ranked in the top three brands with sales of 41,180 units, a year-on-year increase of 53.4%. MG sold 22,665 units, Great Wall 14,260 units, Chery 12,353 units... In the top ten brand sales in Thailand in 2025, Chinese brands occupied four spots, becoming the biggest dark horse of the year.

In January 2026, the market share of Chinese brands historically surged to 47.3%, surpassing Japanese cars for the first time. BYD's monthly sales reached 12,812 units. On the streets of Bangkok, large posters of BYD, Great Wall, and MG are everywhere.

But after the peak comes the cliff.

In February 2026, Thailand's electric vehicle subsidy policy tightened (EV3.5), import car consumption tax readjusted to 10%, and Chinese brand share plummeted from 47.3% to 12%. BYD sales dropped from 12,000 units to 295 units, a month-on-month drop of as high as 97.7%. With a gentle nudge from the policy hand, the sales curve drew a nearly vertical downward line.

However, Chinese brands did not withdraw from the field. In March, soaring oil prices triggered fuel anxiety, and at the Bangkok Auto Show, Chinese brands orders occupied 9 out of the top 12 spots. From January to July 2026, Chinese brand sales in Thailand exceeded 130,000 units, with market share exceeding 30% for the first time, reaching 30.4%. The market share of Japanese cars dropped to 61.7%, creating a new low since entering the Thai market.

Chinese brands have taken root in this market, but the deeper the roots go, the greater the risk of being targeted.

Targeting Has Become the Norm

In October 2024, the European Commission announced the end of the anti-subsidy investigation into Chinese pure electric vehicles and decided to impose anti-subsidy taxes for a five-year period. BYD was taxed at 17.0%, Geely 18.8%, SAIC Group 35.3%, and other cooperating companies 20.7%. The maximum combined tax burden once reached 45.3%. Three Chinese car companies — BYD, Geely, and SAIC — filed lawsuits directly with the EU Court.

On the other side, Russia's moves came earlier and harder. In October 2024, Russia announced a 70% to 85% spike in vehicle scrappage tax, which is a one-time environmental fee all new cars sold locally must pay.

And from January 2025, Russian import car tariffs were raised to 20% to 38%. Under the overlay of multiple policies, Chinese car exports to Russia dropped sharply to 357,700 units in the first 9 months of 2025, a year-on-year decline of 58%. Russia directly fell from the position of China's largest car export country, replaced by Mexico.

The starting point of these countries and regions targeting Chinese cars is actually highly similar: markets can be open, but the expansion speed of Chinese cars exceeded their tolerance range.

The Thailand Federation of Industries openly stated that the Thai automotive industry is facing the most severe crisis since the electrification transformation — loss of complete vehicle production base, sharp reduction in orders for local parts companies nearing bankruptcy. Thai Deputy Prime Minister and Minister of Finance admitted "this consumption tax adjustment received the consent of most car companies", and these car companies are actually mostly Japanese car companies that have already built factories locally.

Every tax increase is a "stress test" for China's automotive industry. From the EU to Russia, from Thailand to Malaysia — yes, Malaysia also announced setting a 200,000 Ringgit minimum CIF price and 180kW power threshold for imported pure electric vehicles starting July 2026. Trade barriers targeting new energy vehicles have slowly changed from scattered cases into a major trend.

Because in those markets without high tariff barriers, the development of Chinese brands is so fast it is frightening.

When we look at the UK, in 2025, Chinese cars sold 196,000 units in the UK, with market share rising to 9.7%, nearly doubling year-on-year. BYD sales reached 51,000 units, a five-fold increase year-on-year. Among all power types, Chinese-made cars accounted for 13.5% of the overall UK market, a historic high — equivalent to one in every eight cars coming from China. Calculating purely in the pure electric vehicle field, Chinese-made models accounted for 27.9% of the UK market.

Let's look at Australia again. In 2025, Australia sold 1.209 million new cars locally, of which Chinese car sales reached 252,000 units, market share 20.4%. In February 2026, Chinese-made cars sold more units in a single month in Australia for the first time surpassing Japan. By May, Chinese-made cars accounted for 34.8% of the total sales locally — for every 3 cars sold, 1 comes from China.

Without the cover of high tariffs, when Chinese brands dialogue with consumers directly using product power, their influence on the local market is self-evident. This dominance can only be delayed by any tariff barriers, but cannot be reversed.

This Scene Looks Familiar

In the 1970s and 1980s, Japan's automotive industry rose, advancing all the way into the US market. In 1986, Japan's car exports to the US reached 3.43 million units, considered the biggest threat by the US, with scenes of crowds smashing Japanese cars on the streets even appearing.

So the US government invoked the "Section 301 clause", imposing 100% tariffs on 13 types of Japanese premium models including Toyota and Lexus. From 1981 to 1987, the US restricted Japanese car imports and imposed heavy taxes of 45% on Japanese motorcycles. Japan was forced to sign "Voluntary Export Restraints", this restriction actually lasted for 13 years.

But what was the result? Japanese cars did not fall because of this. Toyota and Honda became even stronger globally. Tariff barriers failed to stop the decline of the US automotive industry, and also failed to stop Japanese cars from becoming a global mainstream.

Today's Chinese cars are going through the same script.

Thailand's electric vehicle localization rate is currently less than 30%. The first 5 months of this year, Thailand's electric vehicle sales were 82,143 units, of which only 21,396 were locally produced. The concern of the Thailand Automotive Industry Association is that if no intervention is made, the local supply chain will face systemic collapse. From an objective standpoint, this concern is understandable, but the method of building walls with taxes has never truly been effective in history.

And for Chinese car companies, what needs to be done at this stage is to maintain an ordinary state of mind.

Product power continues to improve, costs continue to optimize, supply chains continue to deepen — these are the true weapons to cross tariff barriers.

This path of Chinese cars going overseas is passable, it just needs time.