BANGKOK — The Thai government is being urged to review its eco-car policy following a sharp decline in vehicle sales in the key markets both in the region and in Europe, and in response to the changing priorities of the vehicle manufacturers.
The launch of the Toyota Camry and Prius hybrids in this region over the past month adds fuel to the argument. The government is under increasing pressure to draft a more integrated green-car policy covering a broader range of technologies, including hybrid, electric, and biofuel, including ethanol. There are already local efforts to develop a strong bio-fuel supply industry.
The current eco-car program, announced in 2007, seeks to establish small cars as a new export-oriented vehicle manufacturing segment in Thailand, alongside one-ton pickup trucks. Some of the original required specifications were dropped prior to the launch of the plan in response to manufacturers' demands, in favor of fuel consumption limits of 20km/l and emission levels complying with Euro IV standards.
Under the plan, the Thai government offers preferential excise tax rates of 17 percent in the domestic market, compared with the 30 percent rate applied to conventional cars, as well as duty-free machinery imports and a five year tax holiday. In return, manufacturers must achieve minimum output volumes of 100,000 units per year within five years of production.
Six companies have signed on to the eco-car program, meaning that, in theory at least, 600,000 cars will eventually be produced every year under the program. In light of the current slump in world automotive sales, vehicle manufacturers are increasingly questioning whether these targets are realistic.
There are questions as to their suitability to the Thai market, given that most sedan demand is for compact cars or larger which do not qualify for the incentives. Indonesia favors MPV-type vehicles, while Malaysia's small-car market is dominated by national car companies Proton and Perodua.
Of the six vehicle manufacturers that signed up, only Nissan looks to be on schedule to launch its eco-car early next year. Earlier this year, it announced it will include both Japan and Europe on its list of export markets.
Toyota said at the end of 2008 that it is reviewing all its investments in Thailand, including eco-car production due to start in 2012. Tata Motors' participation in the plan looks to be the most precarious, with very little sales potential in markets outside India. Its scheduled 2010 launch will inevitably be delayed, and the company recently urged the government to review the minimum production requirement.
Fearing potential delays and possible cancellations, the Thai Board of Investment extended the eco-car incentives to cuts of up to 90 percent on import duties of components and materials that are not available locally.
Suwit Khunkitti, minister of Natural Resources and Environment, last week said the government may further improve the tax incentives as a means of helping to stimulate the economy.
He told local reporters that a government panel seeking to avert delays in the eco-car program is looking into "green tax" incentives, where tax reductions are directly related to cuts in carbon emissions.
Inside Line says: More fine-tuning needed to make the solution fit the problem. — Tony Pugliese, Correspondent
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