Who is the Winner? EVs or Flex-Fuel Vehicles and Biofuel?

bangkok-thailandIn looking at the future of alternative fuel vehicles—principally electric vehicles (EVs)—in the Thai market, it appears that the only push for promoting EVs is coming from the Electricity Generating Authority of Thailand (EGAT). In fact, the only comprehensive study on EV use in Thailand has been conducted by EGAT, which suggests that shifting electricity generation at power plants for use in electric vehicles would improve plant efficiency. However, can this alone be the driving force for consumers to move to purchasing EVs? The answer is an emphatic ‘No.’

Thailand’s Future Energy Plans Focus on Biofuel

A major obstacle in transitioning to EV use in Thailand comes in the form of the government’s Alternative Energy Development Plan (2008‐2023), which clearly shows that planned energy output to serve the transport sector for the next decade will be provided by biofuels, not electricity.

Thailand has an abundant supply of sugar cane, which can be processed into ethanol. Ethanol is an alcohol-based fuel made by distilling and fermenting crops, such as sugar cane, and more experimental sources such as cassava and molasses.

Biofuels Make the Most Sense in Thai Auto Market

However, the country will need to establish a mechanism to meet existing demand for biofuels and biodiesel that authorities soon will start to promote.

Currently, measures are being taken to promote more production of vehicles that can run on E85 (85% ethanol and 15% gasoline) in conjunction with the Thai ethanol plan, while development for biofuel supply is just beginning.

The production of E85 models accounted for nearly 10% of all gasoline-powered vehicles in 2012, but we expect this share to increase once a new excise tax system (with benefits for E85) is introduced in the next few years (circa 2016). Assuming that flex-fuel vehicles qualify as Eco Cars, they would enjoy a new tax rate of 12%, compared with the current rate of 17%.

During a recent conference, Dr. Twarath Sutabutr, deputy director‐general at the Department of Alternative Energy Development and Efficiency in Thailand, brought to light several key limitations of the plan to transfer to EV use in Thailand:

• Promoting EVs in Thailand will only cause confusion in an already fragmented and comparatively small passenger-vehicle market.

• The constrained domestic R&D capability on EVs will increase the country’s dependence on imports of major components, which can adversely affect domestic suppliers.

In addition to these points, Dr. Sutabutr suggested that the use of EVs in Thailand should be limited to niche markets that can absorb high economic costs, such as green tourism.

Growth of E-Motorcycles Remains Slow

According to a separate Energy Conservation Plan (2011‐2030), electric motorcycles could be one way to improve the efficiency of energy in the transportation sector. However, currently, there are no concrete measures in place to ensure that sales of e‐motorcycles reach 70% of total sales by 2013, as projected in the plan.

Another recent survey of motorcycle manufacturers also confirms that there is indeed difficulty in shifting to e‐motorcycles, as most motor bikes currently in the market today are already highly fuel efficient. Some motorcycles can travel distances of 80 kpl (kilometers per liter), which is equal to about 188.24 mpg (miles per gallon).

So far, it appears that EVs have not been included in the energy plan dating to 2030. Due to economic constraints from the automotive industry as well as the elements summarized in the aforementioned energy plans, the prospect of promoting EVs in Thailand seems challenging. However, it is also undeniable that for Thailand to succeed as a global automotive production hub, it has to find a way to be a part of the global trend towards next-generation car technology.

Dr. Sutabutr’s suggestions may be reasonable, but it is probably too premature to jump to any conclusions. We will stay tuned to hear about a new investment promotion plan, including EVs, to be released later this year.—Kon Thueanmunsaen, senior analyst, Asean, LMC Automotive and a contributor to the ASEAN Automotive Monthly—Market Trends for J.D. Power Asia Pacific

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