Thailand must accelerate electric car project plan

Sales of hybrid and electric vehicles are expected to rise to 3.1 million worldwide by 2015, according to automakers.

In recent years the industry has seen movements by automakers around the world, whether from Europe, the United States (US), Japan, South Korea or even newcomers to the industry like India.

India, which is the second fastest growing auto market in the world, recently announced that it would push for the hybrid and electric car projects and lower import duty on solar cell equipment.

Malaysia has also announced that its Proton national car brand will be ready to produce its first hybrid model this year, after the company went through major restructuring to recover from its 30 per cent market share slide.

Just five years ago Proton dominated two-thirds of the Malaysian auto market, but has since suffered from intense competition.

Last year, the world witnessed the introduction of the electric car in the mass market, with prominent models being the Chevrolet Volt, Nissan Leaf and Mitsubishi i-MiEV. All three cars were exhibited during the Board of Investment (BoI) fair held in early 2012, reflecting a growing interest in ultra low-emission or pollution-free automobiles.

Hot on the heels of the eco-car market being strongly stimulated with the entry of the Mitsubishi Mirage and Suzuki Swift, the Thai government is now preparing to move ahead to create a third ‘champion product’ for the country’s auto industry – the electric car.

However, Thailand despite being the centre for automobile production in the South-east Asian region, still lacks an important ingredient – a production base for batteries for electric vehicles.

BoI secretary-general Atchaka Sibunruang said the board is preparing to discuss with Prime Minister Yingluck Shinawatra possible policies to attract Japanese investors in automotive battery production in Thailand. Negotiations are expected to take place with major Japanese auto battery producers during the prime minister’s visit to Japan this year, she said.

‘After talking to automakers, many – including Mitsubishi, Suzuki and Nissan – see the possibility of producing electric vehicles here in Thailand. If we can finalise the investment conditions, it would make Thailand a production base for electric vehicles in the near future. When that time comes, the technology for electric car batteries will become more advanced and standardised, ready for mass production with lower prices. This will lower the cost for electric vehicles, and market demand will definitely grow. The next two to three years will be a suitable time for initiating the electric car project because the eco-car project would have become stable, with all models competing in the market. We would then be able to freely expand investment and fully move ahead with the next project,’ she said.

The BoI is presently offering an investment promotion which includes an eight-year corporate and machinery tax waiver for high-tech electric vehicle battery manufacturers. Production facilities can be located in any of the investment zones, and the promotion could be further tailored to help speed up the decision-making process by investors.

A source from the Industry Ministry said there is a high possibility that investments to manufacture electric vehicle batteries would be made in the near future, as many of Japan manufacturers’ production bases are already located in Thailand.

‘The infrastructure for quick charging can be easily implemented, since most of the buildings in Thailand have three-phase high voltage electricity. The BoI is also offering promotions for electric car project investments as the project falls under the energy-saving vehicle category. However, for additional promotions it will depend on the government’s future plan on the direction of the industry. Certain conditions could be adjusted to help convince investors,’ he said.

Ms Piengjai Kaewsuwan, president of the Thai Automotive Industry Association (TAIA) and vice-president for government affairs at Nissan Motor (Thailand), said the use of electric vehicles has grown in popularity, whether it’s in Europe, the US or Japan.

It is expected that in 2024 electric vehicles will account for 10 per cent of global auto production. This is due to the advantages they offer, including much lower energy consumption than conventional petrol, diesel or even hybrid vehicles. The major issue for electric vehicles is the development of high-power batteries that are safe, reasonably priced and can be recycled.

According to Ms Piengjai, governments in many countries including the US and Japan (as well as Hong Kong), are placing importance on the drive to achieve ‘Zero Emissions’. Besides cash rebates, free highway usage and special lanes are offered for electric car users in Japan and China. In Singapore, the government has set up an electric vehicle testing centre that carries out continuous research and development.

‘While we still do not have the capability to produce electric vehicles, the import duty for this type of vehicle is still very high at 80 per cent. The government should lower the import duty and provide technological support, set up a test centre and give more information to the public. This could possibly make electric cars the next champion product for Thailand after pickup trucks and eco-cars,’ she said.

Mr Soraraj Boonsong, director for business development and marketing of Schneider (Thailand), an energy management consultant firm, said the scenario for the electric car market will become clearer. The largest markets will be in Europe while interest in Asia (not including Japan) is still low.

The ‘smart grid’ automated energy production and distribution system, ideal for electric vehicle use, is being implemented by the Electricity Generating Authority of Thailand, the Metropolitan Electricty Authority and the Provincial Electricity Authority, he said.

‘The short-term project requires an investment of Bt12 billion (S$484 million), and by 2026 total investment is expected to reach Bt50 billion,’ he said, adding that the smart grid system has already been implemented in Pattaya City, while it is being planned for other regions as well.

Mitsubishi Motors (Thailand) president Nobuyuki Murahashi said the Thai government should designate the electric car as its next champion product. Thailand is the leader in Asean automobile production and should consider developing technologies that correspond to global demand, he said.

‘The US and Europe both support the use of eco-friendly automobiles like hybrid and electric vehicles,’ he added.

Mr Murahashi admitted that promoting the production of electric vehicles may be a costly investment, especially for the government. But he said it will happen sooner or later, and it’s not only Mitsubishi but also other Japanese and American brands that are ready to participate.

‘The government should start with attracting lithium ion battery producers to set up plants in Thailand and supply automobile companies. For a start, a reduction in import duty for lithium ion batteries could be offered for automakers,’ he said.

Mr Murahashi said Mitsubishi plans to produce the Mirage Plug-in electric vehicle in the future, although it has not decided whether to assemble it in Japan or Thailand, which is the production base for the company’s Mirage eco-car.

Newly appointed Nissan Motor (Thailand) president Kayuki Kimura said one of his main duties in Thailand is to see the electric car project materialise.

He revealed that Nissan is ready to move ahead in producing electric cars in Thailand if the Thai government provides clarity on various policies, such as the 80 per cent import duty as well as the excise duty. If possible, the government should offer special investment promotions due to the environmental benefits of the electric car.

He said the next-generation Nissan Leaf could be produced in Thailand.

‘Government initiative is very important for the birth of the electric car around the world. In Japan there is a special tax and very high incentives (as much as 1 million yen (S$16,000)) per vehicle to help lower production costs,’ he said.

Apart from electric vehicles, there are other types of eco-friendly vehicles that are gaining in popularity.

According to a report from Nikkei, Honda Motor, Japan’s third-largest automaker, plans to produce the Fit Hybrid outside Japan for the first time. It stated that Honda will produce the 1.3-litre car in Thailand for both domestic and export markets.

Last year Honda sold 86,000 Fit Hybrids in Japan. In Thailand it will be called the Jazz Hybrid, the report stated.

The plan will help Honda lower production costs and cater to the demand for eco-friendly vehicles in Thailand, as it will be priced competitively.

Toyota will start mass production of lithium ion batteries for hybrid and plug-in hybrid vehicles after launching its first plug-in hybrid this year with a sales target of 50,000 vehicles.

Due to the rise in demand for these vehicles, Toyota decided to start production of the batteries in Shizuoka Prefecture in central Japan. The company will go into a joint venture with Panasonic.

However, Toyota believes that it will take considerable time for electric vehicles to become widely available, due to the high pricing and limited travelling range per charge.

Still it plans to launch a BEV (Battery Electric Vehicle) and PHEV (Plug-in Hybrid Electric Vehicle) in China next year. Tests are currently being carried out on Chinese roads.

Toyota has been highly successful with its hybrid vehicles, introducing the Prius in 1997 (accumulated sales of over 2 million cars). The company has also invested almost US$700 million (S$887 million) to build a research and development centre in China especially for hybrid vehicles.

Toyota may not presently be able to provide an official answer on how it would continue its plug-in hybrid technology drive in Thailand. But judging from what has happened in China and elsewhere around the world, the same thing will be witnessed in Thailand.

One of the brands expected to offer an electric vehicle here is General Motors (GM), which plans to introduce the Chevrolet Volt in the near future. Thailand is one of the biggest markets and production bases for GM in this region.

Meanwhile, China’s BYD is also interested in introducing an electric car in Thailand next year, and is currently negotiating with local partners. The first model could be shown at the Bangkok International Motor Show in March 2013.

In order for the electric car project to hit the road soon, the government needs to move ahead right now – as it did with the eco-car project.

In this case it is not the technology that is the deciding factor but the package of incentives that the government will use to attract investors.