Tax cut sparks auto price war

Tax cut sparks auto price war

Ford leads way in race to convert to greener gasohol

Published on November 28, 2007

The government's decision earlier this month to decrease the excise on vehicles using E20 gasohol from 30 per cent to 25 per cent has seen many car companies decrease the price of their vehicles.

The first company to announce a drop in price was Ford Thailand. Ford is the only company in Thailand that has been providing an E20-capable vehicle since 2005, when the Ford Focus was launched.

The gasohol issue has been a long and cumbersome one for Ford Thailand. Ford had hoped to get the tax decrease in 2005 and be the first in the market then, but the fact that the fuel was not available in Thailand at the time made the government decide otherwise. The project was shelved for later. At the time, the government decided to focus on compressed natural gas.

However, the recent surge in oil prices has forced the government to reconsider alternative fuels, and gasohol has been brought back into the picture.

E10 gasohol, of which 10 per cent is ethanol and the remainder petrol, has already been available in Thailand for over two years and has helped the nation decrease its oil imports. E20, which is 20 per cent ethanol, will be even cheaper and further decrease imports.

Leading oil companies have now stated that they are prepared to produce E20 gasohol as soon as the government sets the specification required for it. Sales of the fuel can be expected to start next year, although a time has not been set.

"There are four main things required to make gasohol a successful alternative fuel amid rising fuel prices in Thailand," said Saroj Kiatfuengfoo, senior vice president of Ford Thailand.

"First is the fixed government policy, which now seems very clear. Next are raw materials, which the government now supports through the plantation of sugar cane and other materials needed to produce ethanol. Third are products, which now Ford provides, and finally is the customer who decides to buy the vehicle."

Other makes have also joined the race to take advantage of the E20 excise privilege. The Nissan booth at the upcoming Bangkok International Motor Expo 2007 will also show E20-capable versions of the Tiida and Teana. Nissan will announce a new price for the vehicles at the show, but a price cut of Bt50,000 can be expected.

Saroj added that the overall drop in the price of cars was also likely to create a boost in sales next year as all auto companies would decrease their prices.

Nissan insiders are more sceptical about whether a slight price change will create such a large boost in the market and

believe that sales are still likely to depend heavily on the economic and political situation.

A source at Mazda also gave an assurance that the company would have an E20-capable vehicle by the start of next year, which is when the decrease in tax will take effect.

Other Japanese carmakers such as Honda and Toyota were unreachable for a comment. Although the tax decrease is not due until next January 1, Ford decreased the price of its Focus by Bt50,000 last week.

Vijo Varghese

The Nation