With the country facing political stalemate, the second phase of the government's eco-car project has the potential to strengthen the car industry and the overall economy.
Eco-cars attract interest at a recent Bangkok motor show. PHRAKRIT JUNTAWONG
The Board of Investment (BoI) last August approved the second phase of the scheme, focusing on economic, consumer and social goals and hoping to draw 28 billion baht in investment.
It gave a March 31 deadline for applicants to submit eco-car investment plans.
To be eligible for investment privileges, the first batch of manufacturers can apply to expand production or reinvest in the second phase with a minimum of 5 billion baht in capital excluding land costs.
New manufacturers must invest no less than 6.5 billion baht.
They must produce a minimum of 100,000 vehicles annually from the fourth year on, one year faster than in the first phase.
All new eco-cars must meet the Euro 5 environmental standard of releasing fewer than 100 grammes of carbon dioxide per 100 kilometres compared with 120 grammes for existing models.
The government will waive corporate taxes and import duties for machinery for the first eight years of operation.
Participating car makers will also enjoy an excise tax as low as 14%, while E85-compatible eco-cars will be taxed at 12%.
The Industry Ministry expects annual eco-car production to surge nearly 60% to 935,000 vehicles within five years as the second phase attracts investment for the small vehicle.
The first phase, launched in 2007, attracted investment of 28.8 billion baht.
Mitsubishi, Honda, Toyota, Nissan and Suzuki joined the first phase.
Accumulated production of eco-cars from 2010-13 by the five companies amounted to 712,292 vehicles, with Nissan accounting for 53.8%.
Accumulated domestic sales totalled 369,509, with 54.1% made by Nissan.
Over the first 10 months of 2013, eco-car output reached 296,187 vehicles, with Mitsubishi (43.3%) and Nissan (32.6%) leading the way.
Domestic sales of eco-cars totalled 146,985 vehicles.
BoI secretary-general Udom Wongviwatchai expressed confidence the second phase will attract investment, as several car makers have already declared their intention to bid. They include Mitsubishi, Mazda and Toyota.
Mitsubishi plans to make Thailand its major production centre for green models. In the first phase, Mitsubishi invested 9 billion baht to make 200,000 units of its Mirage and Attrage eco-cars.
Mr Udom said Tata Motors and Volkswagen, which withdrew from the first phase, are interested in joining the second phase.
Nonetheless, Piengjai Kaewsuwan, president of the Thai Automobile Industry Association and chairwoman of the Asean Automotive Federation, warned it will not be easy to convince the five existing eco-car makers to join the new phase.
They will have to launch products that meet the new specifications and the new excise tax due to take effect in January 2016.
Inflexible capital and production conditions are a concern for manufacturers. Ms Piengjai, also vice-president for government relations at Nissan Motor (Thailand), said the minimum investment should be 5 billion baht instead of 6.5 billion.
Suparat Sirisuwannangkura, chairman of the Federation of Thai Industries' automotive industry club, said it is a bit too early for the government to kick off the new phase.
Eco-car makers are still busy meeting the criteria for the first phase, he said.
Mr Suparat said most car makers are also worried about the continuity of the government's energy policy.
"Whenever a car maker makes an investment decision on long-term production of 20 years, it has to come up with a production plan and product designs that are compatible with local energy types," he said.