Incentives for switching over to E85 fall short of the mark

Leading auto-makers were frustrated, saying the tax incentives offered were much too weak to encourage them to ramp up production of cars that can run on E85.

Without such cars, where would the ethanol-fuel demand come from?

It is the unwillingness of the government to address the lack of demand for ethanol that would impede a shift by consumers to embrace it, said critics

At the same time, the Energy Ministry is forcing a massive amount of ethanol on to the market.

For users, the main areas of frustration come from price, performance and the breakdown of costs.

Today the average price of E10, which is a 10-per-cent mixture of ethanol and petrol is Bt4.7 below 100-per-cent petrol.

While this should be an incentive for consumers to switch, it often fails, as ethanol-run vehicles often don't travel as far as those using petrol.

It is estimated that motorists obtain 25-30 per cent less mileage on ethanol than on premium petrol.

As such, E85 must be significantly cheaper than just giving a Bt12 discount to petrol.

To reduce ethanol prices further, the excise tax on ethanol should be Bt0.55 instead of Bt2.57 as offered by the government, critics said.

"The Bt1.10 reduction in excise tax on E85 last week is not going to be much of an incentive for consumers," said energy analyst Burin Sukpisal, formerly with the Industry Ministry.

Despite the rising price of petrol, ethanol prices have yet to reach the level where producers find it profitable to boost output to full capacity.

Basing the price structure on Brazil's ethanol prices does not make sense, Burin said, because the production costs in Brazil are lower due to higher-quality cane sugar.

Another problem is many vehicles, especially those more than a few years old, may experience problems with ethanol-blended fuels.

On its own, ethanol is a highly corrosive solvent. It can rapidly cause damage to fuel systems that are not designed to accommodate it.

In theory, most cars should be able to use a mix up to 24 per cent with little difficulty, he says.

But this requires the cooperation of the auto industry to replace some parts, such as those using rubber to enhance durability.

At the early state of ethanol introduction here five years ago, the auto industry was unwilling to modify parts to support ethanol-mixed fuels.

"E10 was introduced to the market in 2003. But the car I had bought brand-new in 2006 had problems with ethanol," Burin said.

"The problem robs the confidence of consumers. I think there is still more that automobile manufacturers can do to ensure all existing vehicles can easily accommodate ethanol."

Others argue that the government should also be much more frank about the problems they may experience when switching.

They need a programme to aid consumers in making any necessary modifications to their vehicles so that they would be more willing to switch to ethanol-blended fuels.

No modifications have yet been made to the government's eco-car programme, which a number of manufacturers have signed up for to mandate E85 vehicles.

If successful, the local market could soon be flooded with lower cost, fuel-efficient vehicles.

But they will require the same fuels the government wants us to use less of.

nantiya@nationgroup.com