Finance Minister Chalongphob Sussangkarn yesterday held lengthy discussions with 12 auto companies, to sound out their opinions on state support for the eco-car manufacturing scheme before deciding on an excise rate to promote the project.

"I'm quite concerned that the project will affect the entire auto industry because some companies cannot compete [once some naufacturers are entitled to lower excise taxes]," he told reporters yesterday evening.

He said that from the one-on-one discussions, he found that some companies were interested in joining the project while others, particularly European companies, showed no interest in this segment.

The auto companies that held talks with the minister were BMW, Honda, Mitsubishi, Toyota, Kia, GM (Chevrolet), DaimlerChrysler, Isuzu, Suzuki, Auto Alliance, Volvo and Nissan.

While the ministry will finalise the excise tax for the eco-car project soon, the project will take a few years to take off and participating manufacturers are only expected to seek the tax benefit in the second year, once they start production, he said.

If excise tax for the eco-car project is revised down from 30 per cent, the new rate will also be applied to imported units of similar specifications, he noted.

"The eco-car is a good project. It's the global trend. Indeed, the small car could be the second champion for Thailand after the one-tonne pickup trucks," he added in a tone that showed his support for the project.

Speaking after his meeting, Toyota Motor Thailand president Mitsuhiro Sonoda said the ministry should lower excise tax not only on the small-car segment, but for all segments. He suggested a regressive rate for the entire industry to boost the passenger-car industry, which has much room for growth given the current demand of only 190,000 units per annum.

Under the regressive rate applied currently, cars with engine capacities below 2,000cc are subject to a 30-per-cent excise tax. Thus, those with smaller engines should be entitled to lower taxes. Then, special tax benefits could be awarded to manufacturers who cut down their energy consumption or manufacture vehicles that meet Euro IV emission standards.

Yontrakit Kia Motors executive director Boonrit Pongmekin said that Kia was extremely interested in producing small cars in Thailand. However, its decision would depend on the tax structure and investment privileges offered by the government, as several countries in the region are wooing investors for similar projects, particularly Indonesia.

Another party to express interest was Mitsubishi Motors. "The parent company in Japan will make the decision. But with low fuel consumption, the eco-car is suitable for the current situation when the petrol price is nearly Bt30 per litre. We are also ready to export the cars to Asean and European markets," said Ek-athi Ratana-aree, an executive of Mitsubishi Motors (Thailand).

Meanwhile, Industry permanent secretary Chakramon Phasukvanich was quoted by Thai News Agency as saying that the eco-car excise tax should be lower than 20 per cent.

If the excise tax is lowered to only 20 per cent, it will not be attractive enough to draw investment in manufacturing the small car, he said.

 nt], it means they don't want the project to take shape, as that level is already applied to gasohol-driven vehicles. I wish they would look forward, to the employment and foreign income. They should not think that one more company taking shape will just snatch revenue from other companies," Chakramon said yesterday.

He noted that India had already set a 16-per-cent excise tax on small cars.

In its quest to become the Detroit of Asia, Thailand has successfully established itself as a hub for manufacturing one-tonne pickup trucks. According to Chakramon, the eco-car project would ensure the sustainability of the Kingdom's auto industry.

Thailand's eco-car project requires the production of small cars that deliver fuel consumption of 20 kilometres per litre. At least half of the minimum required output, or about 100,000 units, must be exported.

Manufacturers taking part in the eco-car project will be entitled to tax privileges from the Board of Investment - exemptions on income tax and machinery-import tariffs - but must produce the engines locally, and at a new production line.

"This will require huge investment as an assembly plant requires at least Bt20 billion. Moreover, there will also be investment in auto parts [manufacturing] and this will create jobs," he said.

"This is one policy to reduce energy consumption. While European Union has come up with the Euro IV standards and Japan has stipulated a fuel-consumption limit for vehicles, this is Thailand's opportunity and, internationally, Thailand is considered a perfect location [for such manufacturing]."

Wichit Chaitrong

The Nation