Thailand PUSHES The Green Bandwagon

Last month, Thai Prime Minister Yingluck Shinawatra and Volkswagen’s AG Chief Executive Officer Christian Klingler had a tete-ta-tete about issues surrounding the green car industry in Thailand. PM Yingluck invited VW to explore the possibility of manufacturing eco-friendly cars in Thailand, taking opportunity of various government policies.

VW has been aggressively investing in Southeast Asia, while the European market is still on its way to recovery. There have been rumours of an upcoming VW plant worth USD265 million in Indonesia, but as yet, no official word on the location has been announced by the carmaker. Perhaps PM Yingluck is lucky enough to change their minds.

Thailand is the largest vehicle producer in South East Asia, yet is the second largest net importer of oil in the region (after Singapore). With oil prices climbing, fuel-efficient cars may not be just an option, but an imperative direction.

It has been 5 years since the Board of Investment launched the eco-car policy in 2007. The participants of Phase 1 – Mitsubishi Mirage, Honda Brio Amaze, Toyota Yaris, Nissan March and Suzuki Swift – are enjoying the benefits of income tax exemption and zero import taxes on machinery. Together, these ‘eco’ projects created 12 000 jobs and drew foreign direct investment of THB 28.8 billion. Last year, 259 000 vehicles were produced although the combined annual capacity was 585 000 units. By the fifth year of each project, the manufacturers must hit production numbers of more than 100 000 units a year, as stipulated by the policy.

Last month, Phase 2 was launched despite concerns of oversupply. More carmakers have been called to  get with the programme. In this next phase, eco-cars must meet more stringent criteria, including higher minimum investment value of THB6.5 million, production of at least 100 000 units by the fourth year, meet the new Euro5 standard of producing no more than 100 grammes of carbon dioxide per 100 kilometres and fuel efficiency of 4.3 liters for every 100 kilometres. Manufacturers will only receive 6 years of tax exemption, as compared to 8 years for Phase 1.