Wednesday, May 28, 2008

E85 push could sink eco-cars Carmakers would face huge expenses

Bangkok, Thailand -- The government's new push for E85 fuel could cause the much-promoted eco-car programme to collapse, local automakers have warned.

Cabinet ministers yesterday approved a broad plan aimed at helping the country reduce energy consumption even as oil and pump prices continue to set records each week.

The highlight is a push to introduce E85 fuel, a blend of 85% ethanol and 15% premium petrol, into the local market over the next few months, or three years ahead of earlier targets.

Energy Minister Poonpirom Liptapanlop said excise tax rates for E85- compatible cars would be cut to promote the plan. Corporate taxes for ethanol producers would also be reduced.

Ministers also agreed to require state vehicles to convert to NGV (natural gas for vehicles), strictly enforce speed limits of 90 kilometres per hour to conserve fuel, and reduce air-conditioner use in public buildings.

Lt. Gen. Poonpirom said that PTT Plc would also increase NGV stations nationwide to 355 from 245 by year-end, and tax breaks would be extended for NGV cars until 2012. All 6,000 buses of the Bangkok Mass Transit Authority also would have NGV kits installed.

Authorities estimate that Thailand could save up to 96 billion baht a year on imported oil if E85 use rose to 60% of total consumption by 2011. Oil costs the country 700 billion baht a year.

But Suparat Sirisuwannakura, an executive vice-president of Toyota Motor Thailand, cautioned that carmakers would need huge sums of money to upgrade their production lines for E85.

Tax incentives would also affect business plans for the six manufacturers already committed to the eco-car programme, which include Toyota, Honda and Nissan.

The eco-cars, launched by the Surayud Chulanont government, will carry an excise tax of just 17% compared with standard rates of 30% to 50%. Eco-cars must have a maximum engine size of 1.4 litres and meet strict fuel efficiency and emission standards.

While tax rates for E85 cars have not been finalised, Mr Suparat said a rate of 20% would almost certainly lead manufacturers to abandon eco-cars in favour of E85 models.

If restrictions on fuel consumption, local content and annual production for E85 incentives are less than for eco-cars, that would push producers away from the small-car programme.

Only Volvo currently offers E85- compatible cars locally. E20 fuel was just launched in February and is still in limited supply, although E10 gasohol is now widely used. Only an estimated 50 stations, all by state-controlled PTT and Bangchak, now offer E20.

One Industry Ministry official acknowledged that the push to E85 would require huge capital investment, both by carmakers and energy companies.

With E85 used in only a few countries, promoting it locally could have huge ramifications for Thailand's position as an auto manufacturing hub, as export opportunities could be restricted compared with other engine technologies.

Another auto executive expressed frustration over the changes in policy.
"I just wish that the government would focus on one thing," he said. "Take compressed natural gas - already seven car manufacturers have committed to producing CNG cars this year. Now, the government wants E85. What will come next?"

Suwit Khunkitti, the deputy prime minister and industry minister, said he would discuss the policies with eco-car producers.

He also expressed confidence that ethanol production could meet demand. Authorities have licensed 47 producers with a targeted daily output of 4.2 million litres. Eleven producers now make 900,000 litres a day, mainly from cassava and molasses.

One PTT executive said privately that ethanol-based fuel was not necessarily cheaper than petrol. "With E10, fuel consumption is about 2-3% higher than petrol due to the lower heat value for ethanol," the executive said.

[Source : Bangkok Post 05/28/2008]


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