Cool response to E85 eco fuel Automakers press for more tax incentives

Ford Escape Hybrid E85

Bangkok, Thailand -- Automakers expressed mixed responses yesterday to the government's new E85 gasohol policy after cabinet ministers approved a new excise tax structure for E85 fuel and compatible cars.

Vehicles that use E85 fuel would be taxed at rates ranging from 25% to 35% of the factory price, a rate similar to that charged for E20-compatible cars, which were introduced in Thailand in January.

Authorities hope to introduce E85 gasohol, a blend of 85% ethanol and 15% petrol, in the local market by the end of the year, a full three years ahead of schedule.

But some manufacturers expressed disappointment that the E85 tax rates did not offer greater incentives for consumers and carmakers. Notably, the tax rates for E85 would remain higher than the 17% rate offered for the eco-car programme.

Paul Stokes, the president of Volvo Car Thailand, said Volvo was a strong supporter of Thailand's plans to encourage the use of alternative fuels, but was ''extremely disappointed'' that the new policies did not facilitate the import or development of E85 technology for the country.

Mr Stokes had earlier argued that taxes for E85 cars should be set at 20%, the rate currently used for cars running on NGV (natural gas for vehicles).

Volvo is currently the only automaker to offer imported E85 cars to local customers.

But Suparat Sirisuwanangkura, a senior vice-president of Toyota Motor Thailand, welcomed yesterday's cabinet decision as a positive step for the local auto industry.

He said it was clear that the government was intent on supporting domestic production of E85-compatible cars rather than imports of fully built vehicles.

The cabinet yesterday also waived import duties for parts used for E85 technology that were unavailable locally. The waiver would run for three years.

Mr Suparat, also the president of the Thai Automotive Industry Association, said the E85 tax structure also struck a balance to minimise the impact on existing production of E20 cars as well as the ongoing eco-car programme.

He estimated that E85 fuel would be as much as 10 baht per litre cheaper than premium petrol, given ethanol prices of 17 to 18 baht per litre.

Adisak Rohitasune, a senior vice-president at Asian Honda Motor Co, said the sudden push for E85 came as a surprise for the auto industry.

''We understand that the government accelerated its plan for E85 because oil prices have risen so quickly. They want to see E85 emerge quickly and we will do our best to support their goals,'' he said.

Volvo C30 Green Racing

But Mr Adisak said it would take time for automakers to retool their production lines to produce E85-compatible cars before the fuel becomes available.

''Even though the government wants to launch E85 in the third quarter, I don't think it can be done. And for the automakers, the quickest that domestic E85 cars can be made available would probably be 12 to 18 months from now,'' he said.

He said that Honda, which produces E85-compatible cars for markets such as Brazil, had no plans to import compatible vehicles but would instead consider assembling the cars locally.

Mr Adisak added that sales of E20 cars were expected to well outpace the target of 100,000 units this year, given sales of 60,000 units in the first four months of the year.

Energy Minister Poonpirom Liptapanlop said authorities would consider cutting import tariffs for E85 cars in the early stages of the programme.

Import tariffs for completely built-up cars now run at 80%, with excise taxes added on top of the charges.

Lt. Gen. Poonpirom also confirmed that E85 would be priced at 10 to 12 baht per litre cheaper than regular petrol.

PTT currently charges 33.39 baht per litre for E20, two baht cheaper than E10 gasohol and 6.70 baht cheaper than 95 petrol.

The minister said local refineries were also committed to making E85 available in the market. PTT and Bangchak both expect to have the fuel available at 30 to 50 stations by the end of the year.

Under the cabinet ruling yesterday, E85-compatible cars would be taxed similar to E20 cars. Vehicles with engines of up to 2,000cc would carry an excise tax of 25% on the ex-factory price, and 30% for engines from 2,000cc to 2,500cc and 35% for larger-engine vehicles.

E85 gasohol would carry an excise tax of 2.5795 baht per litre, or 1.1055 baht cheaper per litre than normal fuel.

Officials estimate that in the initial phases, demand for E85 fuel would be on par with the 50,000 litres per day of E20 now consumed.

For energy policymakers, the shift to ethanol would help reduce demand for imported oil and generate national savings of nearly 100 billion baht per year within the next three years.

According to the Energy Ministry, Thailand uses more than one million barrels of oil and petroleum products each day, which includes demand from the transport, electricity and petrochemicals sectors.

[Source : Bangkok Post 04 Jun 2008]