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Business

Thailand woos more automakers with eco-subsidy program

BANGKOK -- Automakers investing in Thailand will get preferential treatment and tax breaks if they manufacture environmentally friendly cars in the country.

     Six Japanese automakers and four from other countries have applied for the Thai program. It is the second phase of efforts by the government to attract foreign capital in the green technology field.

A Toyota Yaris is displayed at the Bangkok International Motor Show, which was held for 12 days through April 6.

     Thailand's government announced on April 1 that 10 automakers had applied to join the program -- Toyota Motor, Honda Motor, Nissan Motor, Mitsubishi Motors, Suzuki Motor and Mazda Motor from Japan, General Motors and Ford Motor of the U.S. and Germany's Volkswagen, as well as SAIC Motor-CP, a joint venture between China's SAIC Motor and Thailand's Charoen Pokphand Group.

     All of the Japanese automakers apart from Mazda participated in the first phase of the government eco-car manufacturing program. 

Touching a million

Roughly 960,000 units, consisting of eight models, were produced by the end of 2013 under the first phase of the program. Nissan's March compact car, which went into production in March 2010, was among the models made in Thailand. The initiative helped the country bolster its automobile industry infrastructure.

     The government has a number of requirements for qualifying for the second phase of the program: Automakers must invest 6.5 billion baht ($199.8 million) or more in equipment, and production must start by the end of 2019, with annual output of at least 100,000 vehicles by the fourth year. As for the cars themselves, they must have engines no larger than 1.3 liters and be able to drive at least 23km on a liter of gasoline.

     In return, import duties on equipment and components for eco-car production will be reduced and the 20% corporate tax will be also cut or exempted under the program. Excise tax on passenger cars will be slashed from 25% to 14%, 3 percentage points lower than the 17% rate offered in the program's first phase. The government will review automaker production plans and authorize them as early as the end of this year.

     The Board of Investment, a unit of the country's Ministry of Industry, estimates the total investment of the 10 applicants will come to 139 billion baht. Additional production capacity will reach 1.58 million cars per year. The initiative is expected to help the government achieve an annual domestic production of 3 million cars by 2017. The government hopes the program will help turn around the slowing economy, which has been damaged by recent political conflict.

     First-time applicants also have high hopes for the initiative. Volkswagen plans to set up its first car factory in the country, and GM is planning to expand its Thai output. Marcos Purty, managing director of GM Thailand and Chevrolet Sales Thailand, is eager for the country to become an export base for the global market. Ford aims to further push up its annual production of 150,000 cars in Thailand at a new factory that went online in 2012.

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