Eco-Car excise duty 'will not exceed 15%'

Update : The excise rate has been set at 17%!

Details of the Eco-car project continue to trickle out at a frustratingly slow pace, making it seem that nobody really know what is going on. As soon as any tentative details do surface, they are generally met with a barrage from every side, with most of the criticism coming from the industry itself.

Although the final rate will be set by the Cabinet, Deputy Finance Minister Sommai Phasee has pinned a "15% or lower" excise rate on the manufacture of Eco-cars.

What is all this fuss about the Eco-car anyway?

Well, basically, the Thai auto industry is currently very reliant on the one-ton pickup truck, the success of which has been largely due to favourable excise rates which were designed to stimulate investment in the truck industry.

The result is that big trucks cost less than medium sized passenger cars in Thailand, and this in turn leads to strong truck sales.... for trucks. If a one-ton pickup commanded the same excise rate as a passenger car, nobody in their right mind would buy a pickup to do the job of a Honda Civic or Toyota Corolla.

Introducing a lower excise rate on Eco-cars would mean that already cheap cars, assuming they manage to meet the criteria of the Eco-car project, would become very affordable in Thailand. Of course this would be great for the consumer because it would mean more choice, and also a much needed budget market. Something that currently doesn't exist in Thailand in real terms.

How would this impact the industry?

Well, the reason behind the project is to attract investment to the country and it is expected that the Eco-car project could draw in excess of THB 20 billion in new investments.

Companies that are currently manufacturing locally are most resistant to the project, out of fear that it will negatively impact sales of other models, and also doubts of the viability of exporting, which would be required to make the project viable. This is particularly true of those manufacturers producing pickup trucks in Thailand.

Companies without large investments in Thailand are more optimistic, as they have less to lose. For example, Suzuki are to stop sales of the Vitara - which has been updated in every market except Thailand anyway - and wait for the Eco-car project, which they hope will allow them to set up manufacturing facilities in Thailand, and have a fresh attack on the market.

The excise rate is a critical aspect of the Eco-car project. Setting the rate too high and it would fail to attract the desired investment, too low and many fear it would affect the entire industry (negatively).

Good for us

Regardless, the introduction of a lowered excise rate on economical small cars can only be a good thing for consumer. Choice is good.