Incentives from the Thai government to encourage automakers to produce fuel-efficient "eco-cars" have yielded a raft of major investments and started to change how Thais drive, experts said.
Tax breaks for automakers and car buyers were unveiled last year, as the government worried that Thailand's position as the world's biggest maker of light pickups might not be enough to guarantee the future of its auto industry.
Thailand churns out 900,000 one-tonne trucks every year -- about three-fourths of global output.
But amid soaring oil prices and concerns about greenhouse gas emissions, the government expressed concern that the global market for gas-guzzling trucks could weaken as consumers turn to more fuel-efficient cars.
So last year Thailand announced incentives to encourage automakers to set up local production bases for "eco-cars" that meet the most stringent European emission standards and run on fuel with a 20 percent ethanol component.
Sales taxes on smaller cars were also slashed from Jan. 1, which sent sales booming in the first two months of the year.
"First-time car owners -- and especially motorcyclists who want to become car owners -- are cost-conscious consumers," said Surapong Paisitpatnapong, spokesman for the Federation of Thai Industries' automotive club.
"Investments in eco-car production will help grow this new segment of the country's domestic auto market while increasing exports," he said.
Seven automakers, including Toyota, Volkswagen and Tata -- have proposed eco-car projects to Thailand's Board of Investment. Four have already been approved, Surapong said.
Among the deals, Honda plans to invest 6.7 billion baht (US$213 million) to assemble eco-cars while manufacturing engines and parts here.
The new plant will produce 120,000 units a year, with about half destined for other Asian and European markets.
Most of the proposals are designed to produce cars for export. Shipments of passenger cars jumped more than 43 percent in the first two months of the year compared with last year.
But the government is also boosting domestic demand for fuel-efficient vehicles by slashing selected taxes.
"Eco-cars are going to be hot in Thailand's auto market. The lower prices for these minicars, along with high oil prices, will drive up the demand," said Nongnapat Wilepana, a Nissan dealer.
Analysts say the new investments by automakers will also give the broader economy.
"There will be more jobs for local people not only at auto assembly plants for eco-cars but also at auto part plants" supplying the new factories, said Pichai Lertsupongkit, senior vice president at Thanachart Securities.
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