The Wrong Priority Placed on Public Subsidies for Personal EVs in Thailand

Cover photo: Bangkok’s buses are a symbol of inequality and disrespect toward lower income urban dwellers when the transportation policies continues to focus on prioritizing personal vehicles and elevated/underground rail systems. Photo credit: M.H. Benton (2019).
Volume 8, Number 1: June 2022 | Essay


Allow me to begin this essay with some of the positive aspects surrounding the discussion of electric vehicle promotion. Electric vehicles are nice and quiet, clean, and admittedly a symbol of environmentally conscious signaling. It is encouraging for me to see a growing interest in EVs as a sign of increased environmental awareness and concern for the planet and other people. EVs come in all shapes and vehicle types from buses, to songtaews and tuk tuks, to private automobiles, to personal scooters, and beyond. I think the idea of generating electricity from renewable sources such as wind and solar to power private vehicles is a step in the right direction, particularly under conditions when private vehicles make sense. I like the idea of an electric bus fleet, so we can reduce emissions, noise, and congestion. The electric tuk tuks, already in service in places like Ari and Thong Lo, which you can call and pay for with a mobile app is a great option for keeping streets clean, quiet, and safe.

For those who share many of these positive attitude toward EVs, I hope you will follow along with my arguments that will take a much more critical tone toward the adoption of private EVs in developing countries that still lack basic urban transportation infrastructure in order to facilitate an inclusive, cost-effective, energy-efficient, low-emissions transport system like we already see in many cities in Asia.

To be clear, my position is not anti-EV. I see a valuable role for this type of vehicle in a comprehensive transportation network. In this essay, I argue that EVs should not be given priority through subsidization over alternate policies that could yield a greater social net benefit

Government Policies to Promote EV Sales

Since March there has been a significant amount of reporting and commentary in the local press related to the topic of the government’s policy to promote personal EV manufacturing and sales. Let’s first take a look at a very simple overview of what that policy entails.

In March of this year, according to both the Nation and the Bangkok Post, the excise department has reserved three billion baht to funding a price subsidy plan for electric vehicle sold in the country and offered a price subsidy ranging from 70 – 150 thousand baht to a buyer of an electric car. Another part of the policy that was reported in March was the construction of charging stations to make it easier for electric vehicle users to recharge their vehicles at various locations. So, basically, there was a subsidy to offset high prices and infrastructure investment to make it more convenient for prospective users in order to encourage sales.

Fast forward to June of this year, the government set out to reduce the excise tax on electric vehicles from the current 8 percent down to 2 percent.  This supposedly was passed in the second week of June. Referring to the report in the Nation on June 10th, an example of the price reduction is the MG ZS EVX model. The net price will be reduced from 1.26 million baht to about one million baht after taking into account the discount totaling between 150,000 and 246,000 baht from the government subsidy and 96,000 baht from the excise tax reduction.

The Board of Investment is trying to promote EV manufacturing in line with the government’s targets of boosting EV production to 30 per cent of total automotive manufacturing capacity by 2030. This will be roughly 725,000 vehicles produced per year. The prime minister is hoping to create a new industrial direction to help the country fulfill its global commitment to address climate change, including achieving carbon neutrality by 2050 and net zero emissions by 2065.  He hopes that Thailand will become a regional and global manufacturing hub for EV related products which will be good for Thai economy and ideally the environment.

As stated in the introduction, this seem on the surface to be a reasonable environmental policy; however, we should challenge this somewhat superficial enthusiasm. So, let’s take a look at some of the potential goals and objectives that could be achieved by promoting EV sales.

Potential Goals or Objectives of Promoting Private EV Sales

Why might the government want to promote personal EV sales?

From the reports, it seems that business interests are at the forefront; particularly automobile manufacturers and energy companies. From an economic angle, the government could have an interest in growth promotion, related to jobs and exports. They have already stated that they would like to make Thailand a regional production hub for EV related products. This would clearly serve the interests of foreign multinationals as well as the energy companies, so it’s conceivable that they are promoting this for those business interests. However, this would also serve as a general growth promotion strategy on a macroeconomic level in order to create jobs and boost exports.

There is also their stated objectives of emission reduction, particularly global emission related to climate change. So, there is also an environmental justification.

Now, from an urban, environmental, public economics perspective as well as sustainable development, the three primary goals of interests for urban transportation policy should focus on emission reduction (both local and global), energy use reduction (particularly that from fossil fuels) and congestion reduction.

Additional consideration could be given to equity/distributional concerns (inclusive, quality, services and urban spaces), resource conservation (particularly non-renewable inputs in battery production), and business and job growth at the local level.

Criteria of Economic Analysis of Government Policies

In public economics we generally will try to evaluate cost-effectiveness and efficiency of government policies or programs. Cost effectiveness is achieving a given objective in the least-costly way, while efficiency is maximizing the total net benefits. The most simple way that one could start is by performing a simple cost-benefit analysis and rejecting any projects for which the benefit-to-cost ratio is not greater than one or in other words having a negative net benefit.

Now, economists are not satisfied or content with positive net benefits. Assuming cost-effectiveness, we would ultimately like to look for the policies that are going to provide the greatest social net benefit. We normally would conduct sensitivity analysis comparing different scales and parameter changes to try to identify when we are close to the maximum in terms of net benefit. We could also compare different projects or policies to see which one yields the greatest net benefit.

Priority should be given to projects or incremental steps with the lowest marginal (or additional) cost, highest marginal (or additional) benefit because they are what we might colloquially call the lowest hanging fruit or greatest bang for your buck. Once those are in place, the next incremental step would be to add in those with lower marginal benefit and higher marginal cost yielding next largest additional net benefit clearly adding to the overal total net benefit.

So, what we want to identify here is what should the priority be.

Alternative Policies

Now, two alternative policies, we could compare to EV promotion would be bus system improvement and bicycling infrastructure investment.

Let’s start with the public bus system.

If we compare the current state of the bus system to other Asian cities, like Tokyo, Osaka, Taipei, or Singapore; or European cities like in Germany even 20 years ago, we can see that there’s still significant room for improvement in order to match those other places. The BTS and the MRT alternatively are actually of pretty good quality and they are on par with the cities mentioned previously. The network is still limited; but, that is expanding. When you look at those other cities, yes, they have top quality rail lines, but they all have good quality bus service as a foundation of the entire transportation network. This foundation is seemingly lacking in the case of Bangkok. Now, that is one of the area that I think we can see some improvement.

In what ways we can improve the bus system? We could begin by updating to a newer vehicle fleet. The latest technologies are not necessary. Even we were to upgrade to ten year-old technology, that would still be a pretty substantial gain in terms of rider experience (such as air conditioning), cleaner, and more efficient. Some EV buses have already been introduced in pockets of the city, such as campuses, and the government has a plan to roll out more, although these are still proportionately small scale at the moment. I think we can also see gains from natural gas and even newer combustion engine vehicles.

Other areas for improvement include safety (such as driving behavior) as well as time costs (such as punctuality and predictability),  but that must be combined with a policy of road management such that we can separate the passenger automobiles from a dedicated lane for buses, much like the BRT, but allowing space for compatible vehicles that do not inhibit the flow of buses, such as motorbikes and cyclists. That is something that if we make it more a user friendly experience and one where the time cost can be reduced it becomes a more effective user experience. First class bus systems all have stops that includes route maps, connections and timetable information as well as real time arrival prediction. Making this user friendly for tourists would also be a major benefit for the economy.

Now let’s consider an improvement in bicycling infrastructure.

If we look at the other cities in Aisia as well as in Europe, we see that they have proper lane management and infrastructure for locking up and parking bikes and basically facilitating safety and a smooth flow.

We saw roughly 10 years ago, the pun-pun program was introduced in Bangkok: however; it failed to incorporate better bicycling infrastructure which is essential for it to be a reasonable option for people to use. So, while people could now rent the bike, many people were deterred by a lot of the same problem that we see today that have not really seen much improvement which are the safety, the air quality and just the general quality of the road space for using bicycle.

Ideally, what we try to improve or promote is a relatively smooth means of getting around town. In promoting these two policies, the improving of the bus system as well as a bicycling infrastructure can be very good for local businesses, especially those that are along the busier roadways where parking is very difficult to find. It becomes a lot easier to hop off the bus or park your bicycle right in front of the shop and then get back to where you need to go next. That becomes a smooth and safe means of getting around if the proper infrastructure is in place.

In the next section, I will compare the EV subsidy program with these two alternative proposal to see which one will yield the highest net benefit with the same amount of money spent.

How do EVs Compare to Alternate Policies?

And as we said in our objectives portion, we are interested in maximizing the net benefit or at least looking for which policy gives us the greatest net benefit from a social point of view. Now, all of these policies – EVs, buses, and, bicycles – are likely to be associated with a positive net benefits.

Emission reduction

How do EVs contribute to emission reduction? Here we consider personal EVs which are a substitute for other personal automobiles. If we look at the target market for these products I think it’s fair to assume that the market is going to be middle-class consumers and above, because of the price that we already mentioned. I think it’s fair to assume that this target demographic is already driving relatively new vehicles that are relatively clean and quiet. Of course, there are some exceptions like diesel vehicles, pick-up trucks and SUVs. If they are substituting these vehicles with EVs, then we might see a slightly larger improvement. However, if they are already driving relatively new vehicles, it is likely that they are driving relatively clean and quiet vehicles already. With these assumptions in mind, it would be fair to conclude that the improvements in local air quality will be marginal – given that we are considering only a relatively small number of vehicles overall in terms of substitution. When shifting the focus from local to global emissions, I think the improvements will be questionable, because it will depend on the source of electricity used for EVs charging. Admittedly, there is potential for significant improvement in health, even if the benefits are marginal, just due to the large urban concentration. This is an area where we might realize a high net benefit.

However, when comparing this to the alternatives such as improving public transportation – specifically the bus system, not the BTS and MRT – we can see a substantial cut in both global and local emission per capita because what we are doing is we are getting people out their cars into a shared vehicle that is already on the road – even if we assume current conditions continue. Now, if we upgrade the fleet further, that will enhance the reduction. So, if we are substituting a private combustion engine car for an EV, yes, there is going to be a marginal improvement there; but, if you are getting somebody out of that same private vehicle into a bus that’s already on the road, that is going to be an even larger emission reduction, at least at the local level.

If we take it one step further and we look at bicycling, what if we make bicycling more user friendly? You may say, “Well, do people really want it?” I would respond by saying that not everybody does want it; true; at least not at this point. However, there is already a substantial number of people who are keen on cycling around town. If we allocate a similar amount of money that being used to subsidize EVs and put that money into cycling infrastructure, what this does is – just like the bus – it gets people out of their private cars and even out of public transit vehicles and onto a bicycle which uses much less road space. This will lower emissions because these vehicles don’t create emissions.

When we look at European and Japanese cities they have made bicycling a very good alternative and they all provide their users good infrastructure and generally, local air quality is good. We will then begin to see a positive feedback loop in terms of air quality improvement as more people recognize that air quality improves, more people will be willing to cycle. And as more people switch to cycling, emission goes down and additional people would be drawn to the option of cycling.

Energy use reduction

The next area of comparison I am interested in is energy use reduction. This may not be a popular priority, especially since energy use is tied to the growth imperative of our economic system; but, in the interest of sustainability and resource use, this is certainly an important objective.

The energy use reduction comparison really does parallel the previous point. EVs compared to regular vehicles have the potential to reduce energy use per person but it depends again on the source of the electricity being used and the resulting driving behavior. Reducing the use of certain types of energy sources, such as fossil fuels, is certainly a reasonable goal; but, by using less petroleum, we could simply see a shift to other non-renewable sources such as coal, instead of a switch to renewable sources like wind and solar.

We also need to consider the energy boomerang effect, which is when energy efficiency improvements lead to increased use. When vehicles become more energy efficient people could take advantage of that improvement to increase their consumption or their use and that’s not going to result in an overall energy use reduction. We need to keep in mind that just because we see improvements in the vehicles themselves does not necessarily mean that our overall energy use will decline. For the policy comparisons in this essay I am assuming constant vehicle use; however, if I were to relax that assumption by assuming more use resulting from the boomerang effect, I think the point will still stand and to an even greater degree.

Now, how do the alternative policies compare?

With public transportation, just like with emissions, we can expect a significantly greater reduction in per capita energy consumption when compared to the switch from private combustion engines to EVs. This per capita energy use reduction could be even greater if we see that the bus fleet is upgraded to one that is more energy efficient, regardless of whether they are powered by electricity, natural gas, or even high-quality petroleum vehicles.

Now, the energy requirements associated with bicycling are obviously negligible and we could expect a substantial decrease in energy use by having more people switch to bicycling because there is no longer a need to fill up at a gas station or charge a battery. Additionally, there are recognized mental health and physical health benefits from movement. 

Congestion reduction

Lastly, we get to the congestion issue that we in Bangkok care a lot about. The biggest cost associated with congestion is the time cost and that results in an inability to plan one’s day efficiently. With EVs it’s fair to expect that the same number of vehicles will occupy the road space, possibly even more if first car buyers enter the market – someone like myself who still does not use a car. If I were enticed by this policy to enter the car market by getting an EV, the result will be even more private vehicles on the road competing for limited space. Congestion is  likely get worse or, in the best case scenario, not really change much at all. The parking situation will potentially worsen. Switching from a standard car to an EV will increase demand for specialized parking, in particular those that are equipped with charging stations. This will increase competition for already scarce parking. That would lead to even greater time costs, although, this additional time cost of searching for specialized parking could be alleviated only somewhat if the government’s plan to expand the number of charging stations is carried out, bringing us back to the status quo of parking congestion. But at what cost? This would essentially create a problem that we have to spend money toward getting us back to the initial situation – which would be wasteful.

If we look at how the alternative policies perform on congestion reduction, public transit reduces the amount of road space an individual requires. However, in order for the bus system to be optimized, it needs to be decoupled from the shared road space with the private automobiles; otherwise, if buses are still subject to the same road congestion, it will not be viewed by potential users as a significant gain in terms of time costs.

Now you might say that the expansion of the BTS did not eliminate congestion, so why should it work for buses? That is true that congestion for private vehicle users did not decrease. That could be tied to the fact that the BTS system is not comprehensive enough to eliminate the need for a car for many people. There is also a concept in urban economics known as induced demand, which basically means that there are a number of people who choose not to use the road when it gets too congested,; but once it frees up a little bit, typically as a result of roadway expansion, they now choose to start driving. What we end up with is the same equilibrium level of congestion on the road, which is again predictable. The fact that road congestion has not been reduced by the BTS does not necessarily mean that people are not moving more quickly throughout the city, however. Movement is going to be improved for people who have switched and they are the ones who gain in terms of time predictability and reduced time cost. Given the majority of people in the city already use transit services rather than driving private vehicles, this could be a widely shared benefit if services were to improve.

And in urban economics, there is another concept known as Mohring economies, which basically illustrates when transit operators recognize that more and more users are demanding service, they increase the number of vehicles in circulation, resulting in a shorter headway time – or time between vehicles. During peak periods the frequency of vehicles arriving/departing is typically higher, so it’s actually possible that you can get to where you are going faster during those peak times because the frequency of the train/bus/van is much higher, resulting in a shorter wait time to get into a vehicle. Once enough people have switched over to buses, according to Mohring economies, this would lead the transit operator to increase the number of vehicles in use and that could actually reduce the time cost as well. The long headway times on the bus rapid transit (BRT) system is one of the main reasons the service failed to reach its design potential and received much criticism.

When it comes to the effect bicycles might have on congestion, as with buses, they reduce the required amount of road space per person, so this is likely to alleviate congestion if people switch from cars to bikes. If bicycles have a separate lane, the time costs will relate to the unpredictability associated with length of stops at red lights and biking speed associated with physical ability, but this should still allow individuals who know their own abilities to effectively plan their daily activities.

The benefit of good transit and bicycling systems both account for efficient time management and we see that EVs will not come close to improving on this.

Distributional and Social Considerations

From my perspective, the main reason for prioritizing the bus system and cycling infrastructure is that the direct use benefits are going to be much more widely distributed than for EVs, given the number of people who already use the bus system which is estimated to be at least 3 million riders per day or 20% of the metropolitan area population. Particularly important is that for the lowest-income commuters that they are able to enjoy a more comfortable experience. The current buses are a symbol of inequality and disrespect toward lower income urban dwellers. Former transport minister, Chadchart Sittipunt, agreed even back in 2017 that the transport system epitomizes inequality. Not much has changed in the past five years.

It seems reasonable to wonder where the subsidies are for those who are already using the most sustainable and least intrusive modes of transportation; while we see those who are using the least sustainable, most intrusive modes receiving subsidies which only marginally reduce the social costs of the private vehicles they are already driving.

Conclusions

In conclusion, the point is not to suggest that EVs do not yield a positive net benefit. I am certainly not opposed to electric vehicles. In fact I see a valuable role for them in our transportation system in the future, particularly in the form of buses and small soi shuttle transportation. If we already had a first-class bus system and cycling infrastructure, I would be all in favor of taking the next step to adopt this kind of EV policy. It is actually reassuring to me to observe among the Bangkok population the growing enthusiasm and demand for green or environmentally friendly policies. We just need to understand how to most efficiently achieve these environmental demands.

The emphasis of this discussion has been that we need to prioritize the development of a proper transportation foundation, one that serves the needs and offers benefits to a broad share of, if not the entire, population before adding in those types of technologies that primarily benefit only a small segment of the population. Thailand can achieve its goal of becoming a regional export hub without subsidizing domestic consumption. It can also achieve its macroeconomic goals of job growth and local business promotion, arguable even more effectively, by promoting walkability, bikeability, and public transportation.

We may not all agree on or value the goals discussed here, mainly emissions reduction, energy use reduction, and congestion reduction; but, if our values align and we share these objectives, I hope we can agree that the development of socially inclusive non-motorized and public transportation will help us achieve these goals at lower cost and provide more broadly shared benefits. 


References (Chronological – Newest to Oldest):

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One comment

  1. I agree with every point in this essay. Tax incentives on EVs benefit middle-to-upper-income groups, while poor people are entirely neglected since they cannot afford EVs. The most beneficial way for every class is to improve public transport and reduce costs (or make them free if possible but unlikely) such as buses, BTS, MRT, BRT, BMTA, and Airport Rail link. For example, when I was in high school, I had to take motorcycle taxis to the Airport Rail link, then take the BTS, and finally, retake the motorcycle taxis to school and vice versa when I go home after school. The total cost was 320 Baht per day and I study 5 days a week, so it costs 1600 Baht, which is extremely expensive compared to my monthly income. I believe that many people face this problem too. On the other hand, Japanese public transport is way cheaper, and of higher quality than Thai public transport. Thus, making public transport cheaper or free, if possible, but, again, not likely, would be the smartest decision to deal with this issue.

    Regarding improving and adding more cycling lanes, I agree to some extent; however, most poor people cannot afford a bike due to their budget constraints. Some people struggle to pay their rent and bills and afford their needs. Let alone bikes.

    Do tax incentives on EVs benefit everyone? No. Do improvements in cycling lanes benefit everyone? Yes, if they have disposable income to buy a bike and a helmet. Do improvements in the quality of public transport, price reduction, or making it free benefit everyone? Absolutely yes, I believe it will decrease congestion, pollution, and accidents by far. So the only policy I strongly advocate is the public transport improvement policy, but not the improvement on cycling and EVs tax incentives. As the standard of living in Thailand is lower than that of developed countries, many Thai people do not have disposable income to afford a bike and liability such as EVs, so it would not make sense for this policy unless Thailand becomes a developed country then this policy may be more suitable. But first, policymakers need to focus on public transport.

    However, from my perspective, there are many factors that play an important role in this policy which is virtually impossible to execute such as connections with elites, monarchy, corruption, money laundering, and many shady things that I cannot write and discuss if I want to graduate from Chula and be alive.

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