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3 Nov 2006


Thailand’s Automobile Industry….. It is now time to adjust strategy and revise the Eco Car project (Business Brief No.1892)

The situation of a decelerating domestic economy coupled with the impact of volatile oil prices in the global economy have somewhat affected the trend of the automobile industry at present. Therefore related agencies are considering many points to propose to the new cabinet. KASIKORN RESEARCH CENTER (KResearch) forecasts the proposal is likely to include the following key points:
  1. The target volume for automotive production
Formerly the Master Plan for Thai Automotive Industry defined a long term target to produce automotives at 1.8 million units per annum within 2010, with the aim to make Thailand the center of automotive production in the Asian region or the Detroit of Asia. In the last 4-5 years, the domestic automotive market was quite brisk, particularly in 2005 when the annual production volume of Thai automobile industry reached 1 million units for the first time since the automobile industry was established in Thailand. The combined production volume of automobiles in the entire year 2005 reached 1,125,316 units for the first time. From this success, the Industry Minister at that time proposed to increase the target of automobile production volume in 2010 from 1.8 million to 2 million units. Later in the beginning of 2006, the Ministry of Industry, together with Thailand Automotive Institute and in coordination with entrepreneurs in automobile industry, prepared the Draft Master Plan for Thai Automotive Industry Phase II (2007-2010) defining that by 2010, the automobile production will increase to 2 million units per annum, which is divided into 1 million units for domestic sales and 1 more million units for exports.
However in 2006, the domestic economy has been plagued by many negative factors which have affected the overall market situation and the automobile industry. The result is a clear slow down of this industry for the first time since the economic crisis. Moreover, as the global economic trend also exhibits a slow down sign in 2007, Thailand's exports may be affected, including the probability that the growth of automobile exports may decelerate next year.
Hence, it will not be easy for Thailand to reach its goal of being the Detroit of Asia with new annual production target volume of 2 million cars by 2010. The concerned government agencies and private sectors may have to readjust the strategies under the Master Plan more proactively, including the reconsideration of the Eco Car project.
  1. The Eco Car development project
The concept of the project of the Eco Car was presented since 2003. The project aims to help entrepreneurs and manufacturers to develop and produce the Eco Car under their brand names. The car that can be considered for the project must have specification and qualifications, particularly energy saving efficiency, according to the standards that were laid out by the authority. Moreover, the Eco Car project will gain special support and promotion from the government sector. During 2003-2005, many entities representing both government and entrepreneurs of private sector offered their opinions and entered into wide discussions on that topic. Although most of them agreed with the principle, there were some points about which they disagreed. The main reason supporting the Eco car project is to create a new ;Product Champion”, besides the currently popular pick-up truck. At this time, the pick-up truck is the main product of the Thai automobile industry which can lead Thailand to become the Detroit of Asia. So, it is expected that the development of the Eco Car will present a new product supporting the pick-up truck in the future.
KResearch is of opinion that the fluctuating oil price in the global market will affect the car market world-wide. Meanwhile, the automobile industry of Thailand will continue striving to reach the goal of production volume. (regardless of whether it is the former goal of 1.8 million cars or the new goal of 2 million cars.) Accordingly, new products should be launched to support the pick-up truck, such as the Eco Car because this type of car has the potential to gain significant popularity in both domestic and foreign markets. If the project to develop the Eco Car is given full support by all relevant parties and authorities, it will benefit the public, as well as the automobile industry, in addition to contributing significantly to the policy on energy saving of the country. All aspects of the project especially the aspects of the specifications of cars and tax incentives should be carefully assessed and considered by both the government sector and entrepreneurs in the private sector, for the mutual benefit of all parties.

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