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Eco-cars may hold back goals

Sutapa Amornvivat

Sutapa Amornvivat

Thailand will risk failing to achieve its goal of becoming the world's eighth-largest auto-maker by 2015 if the government has no clear direction to support the export of passenger cars with 1,500-1,800cc engines, according to Siam Commercial Bank's Economic Intelli-gence Centre. Sutapa Amornvivat, chief economist and executive vice president of Siam Commercial Bank, said yesterday that although the government's first-car scheme had helped stimulate domestic demand and boost the sales of eco-cars, in the long run the auto-production structure might be harmed.



Thailand positioned itself as the "Detroit of Asia" by championing 1-tonne pickup trucks and passenger cars, but exports of cars with 1,500-1,800cc engines have declined after manufacturers shifted their focus to eco-cars.

Demand for 1,500-1,800cc cars remains strong. Therefore, the government should set a clear direction before losing share in the higher-value vehicle segment, which is the world's biggest and is growing, Sutapa said.

Thailand will reclaim its 12th ranking in global production volume this year by rolling out 2.1 million units.

"Passenger cars with engines larger than 1,500cc carry a higher margin than eco-cars, and if the government will promote eco-cars for export, that means the eco-car segment must be produced for the mass market," she said.

Overseas and domestic sales have changed to 43:57 from 50:50 after the government started giving a tax exemption to buyers of cars with engine sizes not exceeding 1,500cc. The ratio should be 50:50, Sutapa |said.

Another government policy, the rice-pledging scheme, could also create long-term problems, Sutapa said. Although the scheme can boost a farmer's income by 35 per cent, it benefits only the 30 per cent of all farmers participating in the programme.

In the medium to long term, productivity could suffer because farmers are only encouraged to maximise yields without trying to improve grain quality, she said.



SOIL DETERIORATION

Planting and harvesting several off-season crops during the year can cause soil quality to deteriorate. Then farmers have to use more fertilisers and additives to improve the soil, which inevitably results in higher production cost for farmers in the long run.

With the higher price from the pledging scheme, farmers may have more incentive to switch from cultivating other crops to rice. This will eventually lead to an oversupply and falling rice price, while also creating a scarcity of other food crops, Sutapa said.

Since the rice-pledging scheme was implemented, rice exports have dropped by 1 per cent, she added.

The research house has also lowered its 2013 forecast for economic growth to 4.7 per cent from 5 per cent and for export growth to 8-11 per cent from 11-12 per cent to reflect the actual global economic situation.




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