Hybrid Vehicles Face a Bumpy Road in Southeast Asia

bangkok-thailandThree years ago, Toyota Group began producing and selling the first hybrid model—a Camry—in Thailand. Since then, sales of hybrid cars in that country have grown significantly. In 2012, hybrid sales in Thailand were 19,000 units. Sales of hybrids in Thailand have been growing at an average rate of almost 60% during this time frame. Now, there are at least four hybrid models being sold in the Thai market, and this year hybrid vehicle sales are projected to surpass 20,000 units.

Despite strong and stable growth, a volume of 20,000 unit sales is miniscule in a country where projected sales volume in 2013 is 1.2 million light vehicles. The hybrid vehicle sector accounts for only a 1% share of the entire domestic market (3% of passenger-vehicle volumes). This is very small compared with an 18% hybrid share in Japan, the home market of the key OEMs that have sales operations in Thailand. To be fair, the ratio of hybrid vehicles in Malaysia, a key competitor for regional production of hybrids, amounted to just 2%, or sales of 15,000 units, last year.

Currently, we expect the market share of hybrid cars in Thailand to be under 5% for the foreseeable future. Our projection for hybrid sales in 2020 is slightly over 30,000. In comparison, hybrid vehicle sales in Malaysia are likely to nearly reach 50,000 units by 2020, and will account for almost 10% of that country’s passenger-vehicle market.

Hybrids Face Pricing Obstacle in Thai Market

To be sure, Thailand faces a few challenges in expanding the market for hybrid vehicles. One obstacle relates to the structure of the market: pickup trucks still form a majority of the sales. However, hybrid technology is mostly adopted to be used in passenger vehicles, which accounted for less than half of the Thai market versus more than 65% in Malaysia.

Without structural changes through new government policies, it will be very difficult for Thailand’s automotive market to adopt hybrids or electric vehicles (EVs) on any major scale. Another limitation to the growth of hybrids in Thailand comes from pricing. It is, in fact, more economical to use cars powered by a traditional internal combustion engine than it is hybrids.

A recent study by King Mongkut’s University of Technology, Thonburi estimates that under the current market conditions, it is Bt 52,000‐133,000 (approx. US $2,000‐4,500) cheaper to use a traditional internal combustion engine in comparison with operating an electric car over an 8-year period.

Another drawback has been noted by Richard Leu, motoring news editor at the Bangkok Post, who says that the fuel-efficiency benefits of the newly launched Honda Civic Hybrid aren’t realized until “after 140,000 km (86,992 miles) of driving.”

Further investigation shows that prices of hybrids in Thailand are also comparatively higher than prices in other countries. For example, while the Jazz Hybrid sold in Japan costs the equivalent of only $19,000; it is priced at the equivalent of $26,000 in Thailand. Although the $29,000 price in Malaysia is higher than the price of a Jazz Hybrid in Thailand, it is 10% cheaper than the conventionally powered Jazz in Malaysia. In other words, hybrids are being sold in Thailand based on their ‘premium’ image, rather than their economic value.

New Tax Schedules will Hamper Hybrid Sales in Thailand

The newly approved ‘CO2 emission-based automotive taxation’ schedule that is due to become effective from 2016 is likely to further compound the problem. Under the plan, three out of four key hybrid models will be taxed at a higher 20% rate—double the existing preferential 10% tax rate.

If current prices are used as a base, the price of the Toyota Camry Hybrid should rise by a minimum Bt 200,000 (US $ 7,000). Premium hybrid cars with engines that are larger than 3.0L will of course continue to pay a 50% excise tax. Meanwhile, the bracket for pickup trucks remains at the lowest tax rate of 3%.

When we look at these challenges, it seems that the hybrid road in Thailand is filled with potholes and speed bumps that need to be smoothed out and eliminated. Some of these include pricing limitations and government tax rules.Kon Thueanmunsaen, senior analyst, ASEAN, LMC Automotive, contributor to ASEAN Automotive Monthly—Market Trends for J.D. Power Asia Pacific

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