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Published on November 26, 2007

The outlook for Thailand's automotive industry is bright thanks to strong interest from Japanese auto-makers in investing in the government's eco-car project.

Two of them, Nissan and Suzuki, are expected to propose their eco-car projects to the Board of Investment (BoI) this week. One of the BoI's conditions is that each manufacturer must invest at least Bt5 billion in the project.

Honda's application for its eco-car project, with total investment of Bt6.7 billion, was approved by the BoI last month.

Industry Ministry permanent secretary Chakramon Phasuka-vanich said Thailand was the first country to announce a policy of promoting investment in environment-friendly cars complying with Euro IV emission standards.

"It is a success, because these three projects will stimulate investment worth more than Bt100 billion in the automotive, auto-parts and other related industries," he said.

He believed that there would be at least four companies interested in establishing eco-car production here, though he declined to name them.

An automotive-industry source said top Japanese auto-maker Toyota might also be interested in the project but had some reservations. One of its worries is about the demand for eco-cars in the market because a number of small cars from other countries, such as the Proton from Malaysia and the Cherry from China, are penetrating aggressively both domestic and international markets.

"If the government finds proper measures to curb the import of small cars, other auto-makers will be more interested in eco-car investments," the source said.

However, he conceded that such restrictions on imports might violate the World Trade Organisation's rules.

Another reason is that the manufacturing cost of the eco-car will be greater than that of other small cars because of the BoI's condition that its engine specifications meet Euro IV standards.  The source said auto-makers would probably prefer to invest instead in creating a small car that ran on alternative fuels such as E20.

"The market is very important. If they cannot compete with lower-priced cars in the domestic market, they will have to increase their exports, but not many countries in the world use fuel complying with Euro IV standards," he added.

Meanwhile, Chakramon said gross domestic product (GDP) in the industrial sector was projected to grow 5.08 per cent next year, up from 4.5 per cent this year, due to influx of large investments in the electronics, automotive and petrochemical industries.

However, the rising oil price and economic slowdown in the United States are the most worrying factors for industry, he added.

He said the new government should launch clear economic policies to boost both domestic and foreign investors' confidence.

Chalida  Ekvitthayavechnukul

The Nation