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Eco-Friendly Cars to Qualify for Thai Tax Breaks
by Nareerat Wiriyapong, Bangkok Post

Bangkok Post, 15 June 2004 - The Industry and Finance ministries have agreed to offer tax incentives to encourage the production and sale of energy-efficient vehicles, while carmakers have urged the government to cut tariffs on imported hybrid cars.

Industry Minister Phinij Jarusombat said tax incentives would encourage manufacturers to produce vehicles that consume less fuel under the government's "Best Little Car" project, formerly known as "Eco Car". As well, a lower excise tax rate would make the models more affordable for consumers.

"We have reached agreement with the Finance Ministry on a low excise tax on energy-saving models and that would be a part of a reform of the overall tax structure that will be endorsed in the coming months," said Mr Phinij.

"It is a global trend for tax incentives to be provided to energy-efficient models such as hybrid vehicles."

Vachara Panchet, the vice minister for industry, said the availability of energy-saving vehicles would be critical with global oil prices expected to remain high. Automobiles that consume one litre of petrol to a minimum of 18-20 kilometres travelled would qualify for the new tax incentives.

The incentives are a response to a request by three multinational automakers that have expressed interest in manufacturing energy-efficient cars in Thailand. One of them, Honda, said previously that it would invest six billion baht to produce environmentally friendly small cars locally.

Mr Vachara said tax incentives would also be provided for fuel cell or hybrid cars as well as models that use ethanol-blended gasohol.

With the incentives, the Industry Ministry expects the environmentally friendly cars should be priced in a range of 300,000 to 400,000 baht.

Meanwhile, Ninnart Chaithirapinyo, the vice-chairman of Toyota Motor Thailand, said the government should look into the possibility of eliminating the import tax on hybrid cars. Currently, high import duties result in a sticker price of up to 2.5 million baht for an imported hybrid, compared with 700,000 baht if the model is produced locally.

A 1,500cc hybrid car consumes a litre of petrol per 30 km, half the amount consumed by a conventional vehicle.

"However, automakers cannot produce hybrid cars locally because market volume is not adequate for us to have economies of scale," said Mr Ninnart, adding that hybrid vehicle sales globally were only about 20,000 units a year.

The government has also proposed a tax increase on large passenger cars with engine capacity exceeding 2,500cc in order to encourage energy conservation. Mr Ninnart said the move would not have a significant impact on domestic car sales as such large sedans account for just 10 percent of total sales.

He said the industry was still on track to achieve its sales target of at least 600,000 units this year.

Copyright 2004 Knight Ridder/Tribune Business News
Copyright 2004 Bangkok Post, Thailand
Bangkok Post, Thailand

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