Thailand’s ambitious eco-car program is encountering significant roadblocks as the military government re-evaluates the initiative’s future direction amidst economic headwinds and evolving automotive trends. Prime Minister Gen. Prayut Chan-o-cha has voiced concerns regarding the second phase of the eco-car project, signaling a potential revamp of the green-vehicle strategy.
The Prime Minister highlighted the necessity for a cautious approach to the eco-car program’s second phase, emphasizing apprehensions that it could negatively impact the nation’s struggling automotive sector. This reconsideration comes in the wake of General Motors’ decision to withdraw from the program, further underscoring the challenges facing the initiative.
Industry leaders have echoed Prayut’s reservations about the current eco-car program, which incentivizes automakers to produce low-emission vehicles powered by smaller gasoline or diesel engines. Instead, they are advocating for a strategic pivot towards promoting hybrid and electric vehicles (EVs), aligning with global automotive industry shifts and sustainability goals.
The Thai automotive market is still grappling with the lingering effects of the previous government’s first-time car-buyer tax-refund scheme, which led to a steep decline in sales. Last year witnessed a dramatic 34% plunge in Thai car sales to 881,832 units, and recovery signs remain weak. Prayut, addressing the Federation of Thai Industries, stressed the need for collaboration between the Industry Ministry and the Board of Investment to ensure the second phase of the eco-car program avoids replicating the pitfalls of the first-time buyer incentive, which artificially inflated demand and contributed to rising household debt.
Industry Minister Chakramon Phasukvanich indicated to the Bangkok Post that the second phase of the eco-car initiative would primarily target export markets. The stipulations for participation in the second phase require companies to invest a minimum of TB6.5 billion ($200 million) to establish a new plant with an annual production capacity of 100,000 eco-cars within four years. These vehicles must meet stringent emission standards, emitting less than 100 g/km of carbon dioxide. In return, participating automakers are offered incentives including corporate tax waivers and import duty exemptions for machinery for eight years, alongside reduced excise taxes as low as 14%, with E85-compatible eco-cars taxed at an even lower 12%.
However, concerns persist within the industry that the second phase of the eco-car program could lead to oversupply if export markets fail to rebound sufficiently. An anonymous auto executive, quoted by the Bangkok Post, cautioned about the potential for overproduction, stating, “Besides, domestic consumption is unlikely to be strong enough.”
Honda Thailand Chief Operating Officer Pitak Pruittisarikorn voiced broader concerns about a potential glut across all vehicle segments, not just eco-cars. “The eco-car scheme, in fact, does not support all automobile makers,” he stated. He further elaborated that Thailand’s automotive industry, developed over decades for large-scale production across various segments including pickup trucks, passenger cars, and eco-cars, faces challenges due to sluggish domestic and export demand. Pruittisarikorn pointed to the first-time car-buyer scheme as a factor diluting future car demand, compounded by the strong baht which weakens export competitiveness amidst global economic instability.
Mazda Thailand President Hidesuke Takesue echoed the sentiment favoring a focus on advanced technology vehicles, specifically hybrids and EVs. “Mazda totally agrees with the prime minister’s remarks on the eco-car scheme,” Takesue stated, emphasizing the future trajectory of the automotive industry: “The future trend of the automotive industry is electric vehicles.”
In response to the Prime Minister’s reservations, the Energy Ministry has affirmed its commitment to positioning Thailand as an EV production hub. Energy Minister Narongchai Akrasanee informed the Post that the ministry is prepared to revise regulations and laws pertaining to fuel retailers and electricity transmission to facilitate the installation of EV chargers at gasoline stations.
Narongchai suggested a practical approach to EV adoption, proposing hybrid models, such as flex-fuel vehicles capable of switching between fuel and electricity, to address range limitations and cater to longer journeys beyond urban areas. The Board of Investment is actively engaging with energy-related industries and policymakers to formulate policies aimed at attracting EV investment, according to Deputy Secretary-General Chokdee Kaewsang. Narongchai hinted at potential incentives being announced as early as May. He projected that a significant portion, possibly up to half, of Thailand’s EV output could be destined for domestic sales, underscoring the critical need for government support in promoting EV adoption and expanding charging infrastructure. The future of Thailand’s eco-car program remains uncertain, but the increasing emphasis on electric vehicles suggests a significant shift in strategy may be on the horizon, potentially reshaping the nation’s automotive landscape.
