'Green' Cars Boost Thai Auto Industry

Seven automakers have proposed eco-car projects.

Incentives from the Thai government to encourage automakers to produce fuel-efficient "eco-cars" have yielded a raft of major investments and started to change how Thais drive, experts say. Tax breaks for automakers and car buyers were unveiled last year, as the government worried that Thailand's position as the world's biggest maker of light pickups might not be enough to guarantee the future of its auto industry. The kingdom churns out 900,000 one-ton trucks every year -- about three-fourths of global output.

But amid soaring oil prices and concerns about greenhouse gas emissions, the government expressed concern that the global market for gas-guzzling trucks could weaken as consumers turn to more fuel-efficient cars. So last year Thailand announced incentives to encourage automakers to set up local production bases for "eco-cars" that meet the most stringent European emission standards and run on fuel with a 20% ethanol component.

Sales taxes on smaller cars were also slashed from previous rates of 30% to 50% to 17% from January 1, which sent sales booming in the first two months of the year. Passenger car sales jumped nearly 33% in January and 45% in February, against the same months last year, according to Toyota Motor Thailand, the industry's statistics compiler.

"First-time car owners, and especially motorcyclists who want to become car owners, are cost-conscious consumers," said Surapong Paisitpatnapong, spokesman for the Federation of Thai Industries' automotive club. "Investments in eco-car production will help grow this new segment of the country's domestic auto market while increasing exports," he said.

Seven automakers -- including Toyota, Volkswagon, and India's Tata -- have proposed eco-car projects to Thailand's Board of Investment. Four have already been approved, according to Surapong. Among the deals, Honda plans to invest 6.7 billion baht (US$213 million) to assemble eco-cars while manufacturing engines and parts. The new plant will produce 120,000 units a year, with about half destined for other Asian and European markets.

Suzuki says it will spend 9.5 billion baht to build a new factory in central Thailand that will employ 1,200 people and produce 138,000 units a year. About 80% of the output will be for export.

Nissan has announced a 5.55 billion baht investment to produce 120,000 units a year, also mainly for export.

Under the scheme, the companies will not have to pay corporate income taxes on their investments for eight years, and duties on imported machinery will be waived. Most of the proposals are designed to produce cars for export, and shipments of passenger cars from Thailand already jumped more than 43% in the first two months compared to the same period last year.

Copyright Agence France-Presse, 2008

TAGS: The Economy
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