Bangkok - Thailand, already the world's second largest producer of one-ton pickup trucks (after only the US), earlier this month secured itself an eco-car niche in the globe's competitive auto manufacturing sector.

On April 2, Thailand's Board of Investment (BoI) granted tax incentives to Toyota, Mitsubishi and Tata to invest a combined 536 million dollars to produce more than 300,000 eco-cars for the domestic and export markets over the next five years.

The BoI - the government's investment promotion body which grants tax waivers to favoured industries - late last year approved similar eco-car investments worth 703 million dollars by Japanese auto multinationals Honda, Suzuki and Nissan.

In June last year, Thailand announced it would award tax privileges to any automobile manufacturer that invests at least
150 million dollars in the local production of eco-cars that meet the government's standards.

Under the programme, companies have to manufacture no fewer than 100,000 units per annum from the fifth year and meet the government requirements of producing a vehicle that consumes less that 5 litres of petrol per 100 kilometres and complies with the Euro 4 standards of carbon emissions of less than 120 grammes per kilometre.

Volkswagen is still awaiting the BoI's decision on its application to make eco-cars in Thailand, which would mark the German giant's entry into the Thai auto scene.

"If Volkswagen wants to come to South-East Asia this is a good opportunity for them," said Vallop Tiasiri, president of the Thailand Automotive Institute. "They have a special ticket."

Thailand is already South-East Asia's leading automobile manufacturer. Some 1.25 million vehicles were produced locally last year, of which nearly 54 per cent were exported. The country is the world's 14th largest auto exporter.

With the eco-car programme now underway, the Thai government is confident it can meet its target of boosting production to 2 million units by 2010, with 50-60 per cent of that destined for exports.

Ironically, the eco-car programme was stalled for years by a reluctance by past governments to grant manufacturers an excise tax incentive to encourage local production.

Under the military-installed government of last year, Finance Minister Chalongpob Sussankarn finally agreed to slash excise taxes on eco-cars to 17 per cent, effective in October, 2009, giving the future eco-cars a distinct price advantage that should allow them at sell at competitive prices.

Normal passenger cars face a 30 to 50 per cent excise tax in Thailand.

Even so, initially the BoI was expecting only one or two applicants under the programme.

The main reason seven world-class car manufacturers jumped on the bandwagon to participate in the programme can be attributed to the dramatic jump in world oil prices over the past two years.

"When this project was initiated, the price of oil was only 35 dollars per barrel," said Chakramon Phasukvanit, permanent secretary of Thailand's Industry Ministry. "Now it's 100 dollars. That's why the project works."

Chakramon, acknowledged that it was Honda Motors that first suggested the Thai government should promote eco-car production six years ago.

"In fact, we have Honda to thank," admitted Chakramon. Honda, understandably, was the first Japanese auto-maker to participate in the programme, announcing its plan to invest 168 million dollars in an eco-car plant in July last year.

Honda has already chosen Thailand as it's prime auto production base in South-East Asia, as has Toyota.

But the eco-car programme has also attracted Suzuki, Japan's largest producer of small cars, as a newcomer to the kingdom.

Suzuki has already invested heavily in small-car production in India, but rather that looking at India as a future competitor in the market, Thai auto industry experts tend to see synergy on the horizon.

"The Suzuki eco-car factory in Thailand will be able to share some parts and components with its factory in India, because Thailand has a free trade agreement with India under which several auto items are already included," said Vallop.

Presumably the same will be true for Tata Motors, which earlier this year launched its Tata Nano model, selling for only
2,500 dollars on the Indian market.

Thailand's small eco-cars will be selling in the range of 16,000 dollars and up.

"I think our eco-cars, which will be built up to European standards, will have an edge over the small cars, ordinary cars of India and China in the export market," said Chakramon. "Their small cars may be suitable for the Indian and Chinese markets, but not for European and other countries." (dpa)