Posted on 24 Mar 2015
The second phase of the eco-car project must be
considered carefully, as it could worsen the struggling automobile industry,
says Prime Minister Prayut Chan-o-cha.
He expressed concern on Monday that the second phase of the project might hurt
the country's automobile industry, which is still struggling with a severe drop
in sales due to effects from the previous government's first-time car buyer
scheme. Thailand is due to start the second phase of its eco-car plan, with
production expected to be largely for export since the first phase failed to
lift demand at home, where people have limited purchase power following the
months-long political unrest at a time when earnings from exports dropped.
"The Industry Ministry should carefully consider whether the scheme will
cause any harm to the economy. It's tough to sell cars at home now and even
tougher to sell cars abroad, as the global economy remains weak," Gen Prayut
said, adding that the ministry should ensure the policy would not create an
influx of the new small car.
His warning came after the populist policy to boost
domestic car sales failed to benefit the whole country but instead helped to
trigger household debt and lead to a glut of small cars in the domestic market.
The prime minister called for cooperation between the Industry Ministry and the
Board of Investment to continue the plan with extra care to ensure the second
phase would not repeat the failure of the first-time car buyer scheme, which
created artificial demand that contributed to raising household debt.
"The second phase is unlikely to make any adverse impact on the Thai
market, as production will be mostly for export," Industry Minister
Chakramon Phasukvanich said in response to the prime minister's concerns.
"But we also expect local demand will rebound, as most people tend to
change their cars every five years and this would help to raise domestic demand
enough to absorb the increased supply from the second phase.
"He [Gen Prayut] was right about artificial demand caused by the
first-time car buyer policy, which hurt the economy. However, we also believe
real demand at home will increase anyway in the near future."
But the automobile industry remains pessimistic about the
eco-car project, one automobile executive said.
"Although the second phase is aimed at the foreign market, we're not quite
sure whether the global economy will bounce back enough to meet rising supply
from Thailand. Besides, domestic consumption is unlikely to be strong
enough," the source said.
