The Finance Ministry plans to introduce tax incentives by September to encourage foreign carmakers to establish production facilities in Thailand and increase the use of locally made components.

Finance Minister Ekniti Nitithanprapas said the scheme would offer lower excise tax rates to vehicle manufacturers that set up production bases and source components locally.

The cabinet is expected to approve the proposal next month.

"The key to the measure is to provide a tax advantage," Mr Ekniti said.

"Investors that build factories and use parts made by Thai suppliers will pay a lower excise tax rate. Those importing completely built-up vehicles without production bases in Thailand may face higher tax rates."

The incentive programme covers almost all vehicle categories, aiming to promote technology transfer to Thai workers and engineers while supporting long-term income growth.

The tax measures form part of the government's "Thailand's New Horizon" strategy, which aims to attract investment from companies relocating production bases amid geopolitical tensions.

The strategy is intended to ensure Thais at all levels benefit from foreign investment and gain access to new economic opportunities, he said.

Thailand's economic growth potential was about 5% before the 1997 Asian financial crisis but has fallen to around 2% as public and private investment declined from 40% of GDP to 23%, Mr Ekniti said.

The government aims to raise total investment to 30% of GDP and boost annual economic growth to more than 3% within four years, he said.

Foreign investors are increasingly choosing Thailand because of its safety, extensive trade links and infrastructure, with recent projects focusing on technology-intensive sectors including artificial intelligence, semiconductors, electric vehicles and the robotics industry, he added.