Explore how Vietnam, Thailand and Indonesia differ on hybrid car tax incentives, eligibility rules and local content requirements. Read the full analysis now.
Tax Landscape Overview
Thailand and Indonesia dominate new‑car sales in Southeast Asia, and both markets are pushing hybrid adoption with generous tax breaks. Vietnam, meanwhile, is only just beginning to offer special consumption tax (SCT) relief for hybrid electric vehicles (HEVs) starting in 2026.
Vietnam’s Upcoming Hybrid Tax
Under Decree 360/2025, Vietnam will apply a reduced SCT to HEVs that consume no more than 70% of the energy of a comparable gasoline‑engine vehicle (ICE). The SCT for a gasoline car ranges from 35% to 150% depending on engine size, so the hybrid discount translates to roughly 24.5%‑105% of the vehicle price.
Key points for manufacturers:
- Hybrid eligibility is measured by the “R” ratio – the fuel consumption of the HEV versus the average fuel consumption of a same‑displacement ICE.
- The Ministry of Construction publishes the reference ICE fuel‑consumption figures each year (by March 31, with the first set due by Jan 31, 2026).
Thailand’s Excise Tax Benefits
Thailand uses an Excise Tax model similar to a luxury surcharge. For hybrids, the tax sits at 5%‑10% of the pre‑tax price, which is equivalent to about 30%‑50% of the tax levied on a gasoline car.
Excise rates for gasoline vehicles range from 14%‑34%, adjusted by CO₂ emissions per kilometre. Vehicles with engines over 3 L or classified as high‑end luxury are taxed at 50%.
Specific hybrid brackets:
- MHEV – 10% tax if CO₂ ≤ 100 g/km (≈ 4.3 L/100 km or better).
- MHEV – 12% tax if CO₂ 101‑120 g/km (≈ 4.3‑5.2 L/100 km).
- HEV – 6% tax if CO₂ ≤ 100 g/km.
- HEV – 9% tax if CO₂ 101‑120 g/km.
- PHEV – 5% tax for electric‑only range ≥ 80 km.
- PHEV – 10% tax for electric‑only range < 80 km.
Additional Thai requirements include a local‑parts content of 17%‑45% (varying by vehicle type) and a minimum US$84 million investment in hybrid localisation between 2024‑2027.
Indonesia’s Luxury Sales Tax (PPnBM)
Indonesia treats hybrids under its Luxury Sales Tax (PPnBM) regime. For gasoline cars under 3 L, PPnBM ranges from 10%‑40%; larger engines incur 40%‑125%. Hybrids enjoy a lower rate – typically under 10% of the gasoline benchmark.
To qualify, manufacturers must:
- Produce or assemble the vehicle domestically.
- Obtain government certification as a Low‑Emission Vehicle (LCEV).
- Keep fuel consumption ≤ 6.45 L/100 km for gasoline hybrids or ≤ 5.71 L/100 km for diesel hybrids.
- Achieve at least 40% local content.
Key Requirements & Localisation
All three countries tie tax reductions to strict eligibility criteria, aiming to stimulate hybrid uptake while encouraging foreign automakers to deepen local production footprints.
Vietnam focuses on energy‑efficiency ratios, Thailand on CO₂ emissions and electric‑only range, and Indonesia on domestically‑made low‑emission models. The result: Thailand and Indonesia currently offer the most attractive headline rates, but compliance demands are higher.
Bottom Line
For OEMs eyeing Southeast Asian growth, the tax landscape is a balancing act between lower rates and stricter localisation rules. Vietnam’s upcoming SCT relief is modest but simpler, while Thailand and Indonesia reward deeper market integration with larger tax breaks.
Understanding each country’s formula – from Vietnam’s 70% energy‑use rule to Thailand’s CO₂‑tiered brackets and Indonesia’s LCEV certification – is essential for pricing strategy, supply‑chain planning, and long‑term profitability.