BANGKOK -- Tax incentives appear to be driving Thailand's gradual acceptance of hybrid and plug-in hybrid vehicles.
Hybrids have accounted for 75% of presale orders for Toyota Motor's new SUV due to be launched next month, while Mercedes-Benz and BMW have expanded their lineups of Thai-manufactured plug-in hybrids over the past two years.
Thailand introduced tax breaks last year to promote the fuel-efficient vehicles. But it is unclear whether the incentives will prod consumers to break with the practice of prioritizing price over ecology, a common characteristic of emerging auto markets.
Surapoom Tinnangwatana, executive vice president of Toyota Daihatsu Engineering & Manufacturing -- Toyota's local development company, said in a January press conference that the company plans to start, as early as possible, local production of batteries for hybrids under an agreement with the Thai Board of Investment.
Toyota's local unit will make the switch possibly in 2020, according to the company.
Toyota will begin a big marketing push for hybrids when it rolls out its C-HR subcompact SUV in March. Early signs are encouraging, with hybrid models accounting for 75% of the 3,000 presale orders that Toyota has received since it began taking them at a motor show in November.
The positive response is impressive given that the C-HR hybrid starts at 1.06 million baht ($33,725), about 90,000 baht higher than the base price of the gasoline-engine version.
Thailand is the second largest auto market in Southeast Asia behind Indonesia. New car sales in the country grew 13% in 2017 to about 870,000 units, the first on-year rise in five years.
But cars equipped with electric motors constitute only 1-2% of total sales. The biggest reason for their scant popularity is the higher price tags. The vehicles seem to appeal only to a limited number of consumers -- the rich and the eco-conscious.
This is why German luxury brands have been staging big sales campaigns for their plug-in hybrids. Mercedes-Benz and BMW showcase their plug-ins along with charging stands at motor shows as part of marketing strategies to brand the vehicles as advanced technologies worth the prices.
Michael Grewe, CEO of Mercedes-Benz (Thailand), has estimated 2017 sales of plug-in hybrids in Thailand at 7,800 units, according to local media. Grewe also reportedly said that most were luxury cars while predicting that total plug-in sales will grow about 20% to 9,500 in 2018.
Toyota's decision to launch the C-HR was prompted by Bangkok's policy of accelerating technological evolution in the country's auto industry as the era of electric vehicles dawns.
The excise tax rate for the hybrid C-HR is 4%, compared with 20% for gasoline-engine models, according to Toyota. This means the tax-inclusive prices of a 1 million baht gas-powered car and a 1.15 million baht hybrid model are roughly the same.
Other Japanese automakers, including Honda Motor, Mazda Motor and Suzuki Motor, are also considering production of hybrids in Thailand. But they are still unsure about sales prospects, with local representatives of the automakers saying that there are few consumers willing to choose cars based on environmental benefits.
The price-focused behavior of consumers in emerging countries is unlikely to change any time soon.
Automakers looking to ramp up electric car sales in Thailand and other emerging markets may have to do more to enlighten consumers on the relatively low operating costs of fuel-efficient vehicles.