Politics, Economy Stall Thailand’s Eco-Car Program

There’s a big stop sign ahead on the road to the next phase of Thailand’s eco-car program with the country’s military government looking at revamping the green-vehicle initiative.

Prime Minister Gen. Prayut Chan-o-cha says the second phase of the eco-car project must be considered carefully out of concern it might hurt the struggling auto industry. General Motors already has canceled its plan to join the program.

Industry leaders say they share Praut’s misgivings about the program’s support for automakers building low-emissions vehicles powered by small gasoline or diesel engines, suggesting the government instead promote hybrid and electric vehicles.

There’s been a prolonged and steep fall in sales in a hangover from the previous government’s first-time car-buyer tax-refund scheme. Thai sales dived 34% last year to 881,832 units and there has been little sign of recovery this year.

Prayut tells the annual meeting of the Federation of Thai Industries that the Industry Ministry and the Board of Investment need to work together on plan to ensure the second phase does not repeat the failure of the first-time-buyer incentive, which created artificial demand that contributed to raising household debt.

Industry Minister Chakramon Phasukvanich tells the Bangkok Post under the second phase, most production will be for export.

Under the second phase, companies have to spend at least TB6.5 billion ($200 million) to build a new plant with an annual production capacity of 100,000 eco-cars within four years of operation. The cars must emit carbon dioxide of less than 100 g/km.

In return, the government will waive corporate taxes and import duties for machinery for eight years and participating automakers get excise taxes as low as 14%, with E85-compatible eco-cars taxed at 12%.

The Bangkok Post quotes an unnamed auto executive as saying the industry is concerned the second phase of the eco-car program will lead to overrsupply if export markets don’t recover, adding, “Besides, domestic consumption is unlikely to be strong enough.”

Eco-Cars Lose Appeal Amid Global Economic Instability

Honda Thailand Chief Operating Officer Pitak Pruittisarikorn says the automaker is concerned about a glut of all vehicle types, not just eco-cars.

“The eco-car scheme, in fact, does not support all automobile makers,” he tells the newspaper. “Thailand’s automotive industry has been developed for many decades to have massive production for all segments covering pickup trucks, passenger cars and eco-cars, but neither domestic nor export demand is growing as expected.”

Pitak says future car demand has been diluted by the first-time car-buyer scheme, while the strong baht is weakening export capability amid an unstable global economy.

Mazda Thailand President Hidesuke Takesue also prefers a focus on high-technology vehicles such as hybrids or EVs. “Mazda totally agrees with the prime minister’s remarks on the eco-car scheme,” he says. “The future trend of the automotive industry is electric vehicles.”

The Energy Ministry responds to the prime minister’s reservations about the eco-car program

by saying it will fully support promoting Thailand as an EV production hub.

Energy Minister Narongchai Akrasanee tells the Post his ministry will amend regulations and laws related to fuel retailers and electricity transmission to allow EV chargers at gasoline stations.

“The Energy Ministry has suggested EVs should be a hybrid type such as a flex-fuel model, which can be switched from fuel to electricity, to be more practical, as the car can run longer destinations rather than making only short trips around city areas,” Narongchai says.

The Board of Investment is in talks with energy-related industries and policymakers about policies to attract EV investment, Deputy Secretary-General Chokdee Kaewsang says. Narongchai suggests incentives could be announced by May.

He says up to half the country’s EV output likely would be sold domestically, so government support for promoting the cars and expanding charger infrastructure will be crucial.