The government is threatened by escalating oil prices and global warming concerns that could result in truck sales doldrums. This scenario could put a dent to Thai economy because shoppers are expected to shift to fuel-efficient compact cars. These reasons prompted the Thai government to offer incentives for the manufacturer of “eco-cars” that meet European emission standards.
"First-time car owners, and especially motorcyclists who want to become car owners, are cost-conscious consumers," said Surapong Paisitpatnapong, spokesman for the Federation of Thai Industries' automotive club. "Investments in eco-car production will help grow this new segment of the country's domestic auto market while increasing exports.”
By far, seven automakers have proposed eco-car projects to Thailand's Board of Investment. The automakers include Toyota Motor Corp., Volkswagen AG, and Tata Motors Surapong said four proposals have already been approved.
Also, Honda Motor Co. intends to invest $214 million to assemble eco-cars while manufacturing engines and parts in Thailand. Suzuki Motors, meanwhile, will invest $303.658 million to build a new factory in central Thailand. Approximately 80 percent of cars produces will be for export. Nissan Motors Co. also will invest $177 million to build 120,000 units annually. The output is also mainly allotted for export.
"Eco-cars are going to be hot in Thailand's auto market. The lower prices for these minicars, along with high oil prices, will drive up the demand," said Nongnapat Wilepana, a Nissan dealer in Bangkok.
AFP reported that under the scheme, the companies will not have to pay corporate income taxes on their investments for eight years, and duties on imported machinery will be waived.
“Thailand's main worry is that its auto industry depends entirely on foreign companies, since the kingdom has no national automaker,” Surapong noted. “That means the country will have to keep wooing automakers with attractive offers in the future to deter them from looking for better deals for their factories in other countries.”