Thailand’s ambitious Eco Car program, designed to propel the nation into a leading automotive manufacturing hub for fuel-efficient vehicles, is facing a significant review. The military government is expressing concerns about its effectiveness and potential impact on the domestic auto industry, prompting a reassessment of the initiative’s second phase.
Prime Minister Gen. Prayut Chan-o-cha has publicly voiced the need for careful consideration of the Eco Car Phase 2, emphasizing the risk of further destabilizing an already struggling automotive sector. This apprehension follows General Motors’ decision to withdraw from the program, signaling broader industry unease.
Automotive industry leaders are increasingly vocal about their reservations regarding the program’s focus on small gasoline and diesel engine vehicles with low emissions. They advocate for a strategic shift towards promoting next-generation vehicles, specifically hybrid and electric vehicles (EVs), to align with global trends and future demands.
The Thai automotive market is currently experiencing a prolonged downturn, stemming from the after-effects of the previous government’s first-time car buyer tax refund scheme. This incentive, while initially boosting sales, led to an artificial demand surge followed by a sharp decline. Last year saw a dramatic 34% drop in Thai auto sales to 881,832 units, and recovery signs remain weak.
Prayut, addressing the Federation of Thai Industries, stressed the necessity for collaboration between the Industry Ministry and the Board of Investment (BOI). Their joint effort is crucial to ensure that the second phase of the Thailand Eco Car Program avoids repeating the pitfalls of the first-time buyer incentive, which inadvertently contributed to escalating household debt by creating unsustainable demand.
Industry Minister Chakramon Phasukvanich clarified to the Bangkok Post that the second phase is primarily geared towards export-oriented production. The program mandates substantial investment, requiring participating companies to invest at least TB6.5 billion ($200 million) to establish a new plant with a minimum annual production capacity of 100,000 eco-cars within four years. These eco-cars must adhere to a strict carbon dioxide emission standard of less than 100 g/km.
In return for these commitments, the Thai government offers attractive incentives, including corporate tax waivers and import duty exemptions for machinery for eight years. Participating automakers also benefit from reduced excise taxes, potentially as low as 14%, with E85-compatible eco-cars enjoying an even lower rate of 12%.
However, despite these incentives, concerns persist within the industry. An unnamed auto executive, quoted by the Bangkok Post, highlighted the risk of oversupply if export markets fail to rebound sufficiently. The executive also questioned the strength of domestic consumption to absorb the increased production, suggesting that the Thailand eco car program phase 2 might face demand challenges.
Eco-Car Scheme’s Diminishing Appeal in an Uncertain Global Economy
Honda Thailand’s Chief Operating Officer, Pitak Pruittisarikorn, echoed these concerns, broadening the scope to encompass a potential glut across all vehicle segments, not just eco-cars. He stated, “The eco-car scheme, in fact, does not support all automobile makers. Thailand’s automotive industry has been developed for many decades to have massive production for all segments covering pickup trucks, passenger cars and eco-cars, but neither domestic nor export demand is growing as expected.”
Pruittisarikorn pointed to the first-time car buyer scheme as a factor diluting current car demand. He also emphasized the impact of the strong Thai baht, which weakens export competitiveness amidst global economic instability, further complicating the outlook for the Thailand eco car program.
Mazda Thailand President Hidesuke Takesue aligned with the growing sentiment favoring high-technology vehicles. “Mazda totally agrees with the prime minister’s remarks on the eco-car scheme,” Takesue stated, emphasizing the future direction of the automotive industry: “The future trend of the automotive industry is electric vehicles.”
Responding to the Prime Minister’s reservations, the Energy Ministry signaled its commitment to promoting Thailand as an EV production hub, indicating a potential pivot in the government’s automotive strategy.
Energy Minister Narongchai Akrasanee informed the Post of the ministry’s plans to revise regulations and laws governing fuel retailers and electricity transmission. These amendments are aimed at facilitating the installation of EV chargers at gasoline stations, a crucial step in building a robust EV infrastructure to support the Thailand eco car program evolution.
Narongchai suggested a practical approach to EV adoption, advocating for hybrid models, such as flex-fuel vehicles capable of switching between fuel and electricity. This approach, he argued, would address range limitations and enhance practicality, enabling longer journeys beyond short urban trips.
The Board of Investment is actively engaging with energy-related industries and policymakers to formulate policies that attract EV investment, according to Deputy Secretary-General Chokdee Kaewsang. Narongchai hinted at potential incentive announcements as early as May, signaling a proactive approach to fostering the EV sector.
He projected that a significant portion, potentially up to half, of Thailand’s EV output would be destined for domestic sales. Therefore, government support for both promoting EV adoption among consumers and expanding the charging infrastructure will be paramount to the success of this strategic shift and the future of the Thailand eco car program.
