Automakers Balk at Staying With Thai Eco-Car Program

Automakers in Thailand say they are reluctant to join the government eco-car project's second phase because financial and production conditions are too rigid.

The complaints were made at a seminar held on the sidelines of the Thailand International Motor Expo, the Bangkok Post reports.

The Board of Investment has set a March 31 deadline for applicants to submit eco-car investment plans. To be eligible for tax breaks, automakers must spend at least TB6.5 billion ($202 million) on a new plant with an annual production capacity of 100,000 units within four years of operation. Eligible cars must emit less than 100 gm/k of carbon dioxide.

In return the government will waive corporate taxes and import duties for machinery for the first eight years of operation, and participating car makers will pay an excise tax as low as 14%. Eco-cars that can run on E85-compatible fuel will be taxed at 12%.

The Industry Ministry expects the second phase of the program will see annual eco-car production jump almost 60% to 935,000 units within five years.

But the industry is not so sure.

“Convincing the five existing eco-car makers to join the new phase is not easy, as they have to launch products that not only meet the new specifications but also the new excise tax which is due to become effective in January 2016,” Piengjai Kaewsuwan, Thai Automobile Industry Assn. president and ASEAN Automotive Federation chairwoman is quoted as saying.

Piengjai, also Nissan Thailand’s vice president-government relations, says the minimum investment should be lowered to TB5 billion ($155 million).

Federation of Thai Industries auto industry club Chairman Suparat Sirisuwannangkura tells the seminar it is too early for the government to be launching the new phase, as eco-car makers still are busy meeting the first-phase criteria and worrying about the continuity of the government's energy policy, as well.

“Whenever an automaker makes an investment decision on long-term production of 20 years, it has to come up with a production plan and product designs which are compatible with local energy types,” Suparat says.

Board of Investment Secretary-General Udom Wongviwatchai says at least four automakers are expected to apply for the second phase with combined investment plans of TB23 billion to TB26 billion ($715 million to $808 million).

The first phase, launched in 2007, attracted combined investment of TB28.8 billion ($894.7 million) by Mitsubishi, Honda, Toyota, Nissan and Suzuki. The five automakers built 712,292 eco-cars between 2010 and 2013, units with Nissan accounting for 53.8%.

Eco-car production in the first 10 months of this year was 296,187 units with Mitsubishi producing 43.3% and Nissan, 32.6%.

How the current violence in Bangkok by protesters attempting to topple the central government will affect automakers’ spending plans was not raised at the seminar.

But economic forecasters at the University of the Thai Chamber of Commerce says consumer confidence has plummeted to its lowest level in nearly two years.

The index was down in November for the eighth straight month at 75 points. A score below 100 indicates negative confidence.

Weaker confidence reduces consumers' inclination to spend, but organizers of the motor expo running to Dec. 10 are sticking to their target of 50,000 vehicle bookings from 1.6 million visitors.

Thailand has managed to survive many crises in the past, organizing committee Chairman Kwanchai Paphatphong tells the Post. “We are confident that we will be able to pass through this year's political situation without problems,” he says.