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Published on January 14, 2008

 It was an off-the-cuff comment by an officer of Asian Honda Motor who preferred not to be named, but it carried the weight of present optimism in Thailand's automotive industry.

"The auto market this year looks better than last year," the officer said. "All the models to be launched this year will be E20-compatible and with lower prices they should interest consumers hugely."

Asian Honda Motor is Honda's Bangkok-based regional headquarters.

E20 is a gasohol fuel containing 80 per cent petrol and 20 per cent ethanol. The E10 gasohol currently sold in Thailand has only 10 per cent ethanol, but E20 gasohol, together with biodiesel, is sparking the auto industry's enthusiasm as crude-oil prices continue their relentless and devastating climb.

To promote the use of E20, the Finance Ministry earlier agreed to chop the excise on E20-compatible cars by 5 per cent from 30 per cent to 25 per cent. The saving has been passed on by carmakers to customers, leading to price cuts for new E20-compatible cars ranging from Bt30,000 to Bt110,000, depending on the model.

The Energy Ministry expects that about 60,000 E20-compatible cars will be sold this year. This official optimism may be a key factor in convincing auto companies that total domestic car sales this year will reach 700,000 units, compared with 630,000 last year, although continuing political problems could destroy that hope.

"Many other makers have already launched E20-capable vehicles, and some are likely to launch them in 2008, which will create more interest in this segment," says Pitak Pruttisarikorn, director at Honda Automobile (Thailand), the distributor of Honda vehicles.

At present, vehicles that can run on E20 include Honda (City-ZX, Civic, Accord and CR-V), Mitsubishi (Space Wagon), Mazda (Mazda 3), Nissan (Teana and Tiida) and Ford (Focus and Escape 3.0 L). The biggest player in the Thai automobile market, Toyota, has yet to say which of its models will be E20-compatible.

Following the cut in excise, the first company to announce a drop in price was Ford Thailand, which slashed the price of its Focus model by more than Bt50,000.

Ford was also the first carmaker to launch a car that was specifically compatible with ethanol-mixed fuel. When the E20-compatible Ford Focus was first launched in 2005, E20 was not yet available in Thailand.

The gasohol issue has been a long and cumbersome one for Ford Thailand. The company had anticipated that the excise decrease would come in 2005, due to a previous government announcement, and that it would be the first in the market with an E20 model. The fact that the fuel was not available in Thailand at the time made the government reconsider its announcement, and the project was shelved for later.

At the time, the government decided to focus on compressed natural gas, and the first car that came with a manufacturer-fit CNG kit was the Chevrolet Optra.

However, the recent surge in oil prices has forced the government to reconsider yet again, and gasohol has been brought back into the picture.

E20 is the alternative fuel that the government now wants to promote, because it will save the country billions of baht by significantly reducing imports of crude oil.

Climbing demand for gasohol (E10) and biodiesel cut Thailand's oil imports by Bt4.7 billion last year, and the upward trend should save another Bt14 billion for the country this year. Demand for E10 gasohol has now reached 7.4 million litres a day, and the Energy Ministry hopes that by 2013 conventional petrol will be driven out of the market as high oil prices force drivers to switch to gasohol.

Still, industry experts fear that many customers will remain reluctant to buy E20-compatible cars. "There are so few stations that sell the alternative fuel," they say.

Launched just this month, E20 is presently available at only 17 PTT and Bangchak fuel stations. PTT will increase the number of stations to 100 by the end of April, but most will be located in major cities.

This is also a concern of Siam Nissan Automobile (SNA), the Nissan distributor.

"We do not see a large increase in sales due to the decreased prices. Most of the major players have lowered the price of their products, so the competition will remain the same," says Roger Immel, vice president for sales and network development at SNA.

"Besides that, it will take one or two years before E20 becomes a mainstream fuel and reaches regions outside Bangkok. It's like NGV stations, which took a while to get established," he says. "However, we fully support the government's decision to turn to E20."

The Energy Ministry's plans to promote alternative fuels do not stop at E20. It plans to introduce E85, with an ethanol content of 85 per cent.

While some companies question the practicality of this plan, Volvo for one should be happy about it. Volvo recently showcased its racing version of the S60, which is E85-compatible, in the Swedish Touring Car Championships. Volvo Car Thailand's chief executive Paul Stokes said the S60 demonstrated the zero impact of ethanol on engines and performance.

Conscious of escalating energy prices, many consumers are also showing interest in hybrid cars, which have both electric motors and petrol engines.

Hybrids have not been sold in Thailand in considerable numbers due to their high retail prices, as they suffer from high import duty. An option would be to produce them locally, but this is not an attractive proposition for auto companies due to the limited number of units that would be sold in the region, though some Japanese brands are considering it.

Honda and Toyota have imported the Civic and Prius hybrids respectively to show off their green credentials to the Thai media, but there are no plans to sell them, even in imported form.

However, grey-market auto-importers have been drumming up consumer interest in hybrid vehicles. The two main models sold as hybrids are the Toyota Alphard and the Toyota Estima.

Energy Minister Piyasvasti Amranand says high oil prices are going to force consumers to use alternative fuels, and with the price of Dubai crude oil moving towards US$100 (Bt3,300) per barrel he is probably correct. Already many Thai car-owners are dreaming of vehicles that will cut their fuel costs, and with that sentiment at the forefront of auto-industry planning, 2008 could see the start of a general switch away from conventional fuels.

Vijo Varghese

The Nation