Automakers Line Up for Thai Eco-Car Approval

Ten auto manufacturers file applications to join the Thai government eco-car Phase 2 scheme, committing to spend a combined 139 billion baht ($4.3 billion) to build an additional 1.58 million units a year.

Approval of all 10 applications will put Thailand well on the way to reaching its target of building 3 million vehicles a year by 2017.

Board of Investment Secretary General Udom Wongviwatchai tells The Nation newspaper the 10 proposals have a combined capacity of 1.58 million units.

It is twice the number that took part in the original program, and Udom says the five from the first phase all have applied for Phase 2.

“The interest has been higher than expectation, reflecting their confidence in Thailand’s potential as a global automotive manufacturing hub in the world,” he is quoted as saying.

The Bangkok Post reports Udom declined to reveal the names of the companies, saying they wish to remain anonymous.

But the five players from the first phase are Toyota, Suzuki, Nissan, Honda and Mitsubishi, and American manufacturers Ford and General Motors have both announced they are seeking to join the program.

The Nation says the other newcomers include Mazda and Volkswagen, which will produce its Beetle locally for the first time.

The existing players plan to spend TB86.8 billion ($2.7 billion) to add 753,000 units a year, with the newcomers planning to dole out TB52.2 billion ($1.6 billion) to add 828,000 units.

GM Thailand Managing Director Marcos Purty says GM’s intent to develop a new Chevrolet car for production in Thailand is well aligned with the objective of the eco-car program.

“By submitting this application, GM reaffirms its commitment to investing in Thailand and making Rayong a strategic hub for global exports,” he says in a statement. “Additionally, this investment will bolster our long-term commitment to the excellent regional supplier network.”

The program calls for automakers in Thailand to build an all-new vehicle that is fuel-efficient, environmentally friendly, safe, and low-cost, for sale throughout the region by the end of the decade. Eco-cars are expected to use many locally produced components, including powertrains.

Ford Thailand Managing Director Yukontorn Wisadkosin says his company long has studied domestic eco-car demand.

“The eco-car market still has potential for Ford,” she says.

The first phase, launched in 2007, attracted investment of TB28.8 billion ($890 million).

First-phase participants can apply to expand production or reinvest in the second phase with a minimum of TB5 billion ($154.5 million) in capital excluding land costs.

Newcomers must invest a minimum of TB6.5 billion ($200.9 million) to build a new plant with annual production capacity of 100,000 eco-cars within four years of operation, one year earlier than under the first phase.

Participants must fill an integrated package consisting of car assembly, engine manufacturing and parts manufacturing or sourcing.

Cars produced for the domestic market must achieve fuel economy of at least 55 mpg (4.3 L/100 km) and comply with Euro 5 emissions standards, while producing no more than 100 g/km of carbon dioxide.

In return, the government will waive corporate taxes and import duties on machinery for the first eight years of operation. Participants also get an excise tax as low as 14%, while E85-compatible eco-cars will be taxed at 12%.

The investment board has proposed two additional years of corporate income tax exemption, if investment of at least TB800 million ($24.7 million) is made in developing Thai parts suppliers and mold and die manufacturers within the first five years of the corporate income tax exemption period. Investment in the sector of TB500 million ($15.4 million) earns an additional year of tax exemptions.

If a company fails to meet the minimum production requirement, the tax exemption will be withdrawn in proportion to the missing volume.

One manufacture not applying is India’s Tata Motors.

Tata Thailand CEO Sanjay Mishra tells The Nation that while the eco-car incentives are interesting, Tata sees it as better not to take part.

“There are too many eco-car competitors in the market now led by Japanese automakers, while Tata's sales volume is not yet enough to make the company's vehicles competitive,” he says.