The divergent green car policies across Asean create unique combinations of market "push" and "pull", dramatically impacting demand patterns and opportunities for future growth, according to Frost & Sullivan.
Dushyant Sinha, associate director of the automotive practice for Asia-Pacific, said yesterday that the three biggest auto countries in Asean – Thailand, Malaysia and Indonesia – have all embarked on low emission, high mileage vehicles, but their policy approaches and focuses are significantly different.
Thai eco cars have stringent product and investment requirements, while Malaysian EEVs cover the widest possible range of segments and vehicles.
Thailand provides a bouquet of incentives across income tax, excise duty and import duty, while Malaysia customises its offerings based on how strategic the investment is.
The developments in the green car space are not limited to the Big Three. The other two Asean countries boasting local manufacturing – Vietnam and the Philippines – are also toying with various policy initiatives and roadmaps to boost investment.
In the Philippines, the hybrid incentive bill is on the verge of becoming a law and is expected to further support existing grassroot initiatives such as the e-jeepney.
Thailand’s limited market necessitates a strong “push” strategy with government support such as the first car buyer policy, while Indonesia’s large and growing customer base and low motorisation create a natural growth engine to drive forward its low-cost green car agenda.
It is the strong policy “push” that has given Thailand a significant lead over Indonesia and Malaysia in the green car space. However, its sustainability would be a key challenge over the next decade.
Thailand has been a virtual pioneer in the green car space in the region. The eco car programme, launched in 2007, is the bedrock of the government’s green car policy. So much so that green cars are virtually synonymous with eco cars in Thailand, although the former also include hybrids and other alternate fuel vehicles.
Eco cars have changed demand patterns in a market dominated by pickup trucks. Close to 180,000 eco cars were sold last year, representing a penetration of about 27 per cent, making green cars the fastest growing segment in the last four years.
Thailand’s efforts in the green car space are not just limited to eco cars. The country has announced preferential excise duties for different fuel types.
“A new excise duty structure has been planned from 2016 based on carbon dioxide emissions instead of engine capacity. This is expected to favour eco-car manufacturers considerably,” he said.
The Indonesian auto market has been abuzz with news of the low cost green car (LCGC) policy of the government, which is going to provide a much needed shot in the arm and help the country overtake Thailand as the largest car manufacturer in the region.
While the soil mix for explosive growth has been in place for quite some time – low motorisation levels, increasing disposable incomes and a large growing middle class – the government’s tightening of auto financing, slowly brewing inflationary pressures and the weak commodity sector have served as restraints.
The LCGC policy could change the landscape of the domestic market and boost sales, both in domestic and overseas markets, in the long term. Demand for cars could see an increase of as much as 40-50 per cent.
Malaysia put forth its approach only earlier this year in January through the national automotive policy (NAP). Though there were preferential duty provisions for hybrids and EVs in the previous NAP (2009), Malaysia has only now put together a comprehensive blueprint dealing with the entire value chain with a view to increasing investment, improving competitiveness and enhancing productivity.
As far as automaking is concerned, Malaysia has been a pioneer in the region, having embarked on its national car programme way back in the early 1980s. However, over the years, its market has been plagued by structural weaknesses that have in a way clipped its wings, restraining growth and making it harder to compete with Thailand and Indonesia for fresh investment and to develop the local industry further.
These challenges form the backdrop of NAP 2014 and are key to understanding the Malaysian government’s focus on its version of green cars – energy efficient vehicles.