Scepticism over some carmakers' commitment to eco-car project

Economy April 09, 2014 00:00

By Pichaya Changsorn
The Nation

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Some automotive-industry executives are highly sceptical of the seriousness of car companies that have applied to participate in the second phase of Thailand's eco-car programme.

“They just don’t want to miss the train,” said a top executive who requested anonymity. “There are so many factors that they have to consider” before pouring money into the project, first of all the local political situation.
The Board of Investment (BOI) announced last week that 10 car companies had submitted their intent to invest a total of Bt138.89 billion in Phase 2 of the government’s eco-car project to produce 1.58 million units per year of energy-efficient small cars by 2019. This came amid a prolonged political crisis, and a sharp fall in the domestic automobile market, which plunged 44.8 per cent year on year in February.
Thai Autoparts Manufacturers Association honorary chairman Prasartsilp On-aht said there was a lot of confusion surrounding the eco-car project’s Phase 2, as carmakers seemed to be taking an ambiguous stance.
“The automakers seem to be uncertain, and they are not looking quite confident. If the [current political] situation continues, it will be rather difficult” to push the scheme forward, he said.
Pongdej Sriwachirapradit, president and chief executive of Toptech Diamond Tools, an auto-parts maker, said the biggest issue was how to help these 10 companies sell their vehicles. 
“Is this project coming at a wrong time?” he wondered, citing the current car-market conditions and the free-trade agreements that will force Thailand to lower its excise taxes and tariff barriers in the near future.
Moreover, consumer trends are tilting towards moving up to medium-sized cars or doing without a vehicle altogether, he said.
“As an auto-parts maker, we will benefit from an expansion of the market. But in reality, there are a lot of risks in the macroeconomic aspects.” 
However, Suraphong Phaisitphatthanaphong, vice chairman and spokesman for the Federation of Thai Industries Automobile Club, said the fact that 10 automakers had expressed interest in joining Phase 2 confirmed the confidence of investors in the readiness and strength of the Thai automotive industry. It also reflected that they understood that the political turbulence is only a short-term.
The BOI said all five Japanese automakers – Toyota, Suzuki, Nissan, Mitsubishi and Honda – that had taken part in the eco-car project’s first phase had submitted plans to join Phase 2, while five firms are newcomers to the scheme. US companies Ford Motor and General Motors have issued statements confirming their interest in participating in the project. The other three are reportedly Volkswagen, Mazda, and a Chinese company.
Matt Bradley, president of Ford Asean, said the company’s investments in Thailand were based on long-term planning, and it had closely followed the country’s commitment to growing a world-class automotive industry. 
“We are absolutely committed to our business and investments in Thailand, and are looking forward to the second phase of the eco-car policy, for which we have submitted an application to participate in. 
“Additionally, we consult with our business partners throughout the region on a regular basis, and they too remain committed and confident in Thailand’s future.”
Eligible applicants to Phase 2 will have to invest at least Bt6.5 billion in their projects and operate a complete manufacturing line, covering vehicle assembly and auto-parts and engine manufacture. The production volume must be at least 100,000 cars per year (from the fourth year of operation). 
The engines used in the cars produced under this scheme must pass the Euro 5 standard with less than 100 grams of carbon-dioxide emission per kilometre. Fuel consumption must be less than 4.3 litres per 100 kilometres, while displacement must be 1,300 cubic centimetres for petrol engines, and 1,500cc for diesel engines.
In return, the government will waive corporate taxes and import duties for machinery for up to eight years, and participating automakers will pay an excise tax as low as 14 per cent. Eco-cars that can run on E85 fuel (85-per-cent ethanol) will be taxed at just 12 per cent.