Mitsubishi: Allow firms in first eco-car project to join second

Automobile manufacturers who have taken part in the first eco-car project should be allowed to join the second eco-car project, since most are likely to achieve the technical requirements proposed by the Thai government, according to a top Mitsubishi executive in the kingdom. 

Mitsubishi Motors Thailand president Nobuyuki Murahashi said the company is discussing the matter with the Industry Ministry. “We are interested in taking part in the Eco-Car 2 project since we are already developing vehicles that fit the requirements, such as Euro 5 emissions and CO2 levels of under 100gm/km. We agree with these requirements,” he said. 

Companies that missed out in the first scheme are expected to participate, such as Mazda and Ford. Meanwhile, new players like Volkswagen are rumoured to be interested, although strong Japanese domination in the Thai auto industry may discourage the company from taking the eco-car road. 

The excise tax structure for Eco-Car 2 vehicles will be lowered from 17 per cent to 14 per cent, while those that are E85-capable will enjoy an even lower rate of 12 per cent. 

However, Murahashi said the amount of investment needs to be negotiated. “We believe the Thai government won’t create disadvantages for companies that have already taken part in the first eco-car programme,” he added. 

Apart from Mitsubishi, other participants in the programme include Honda, Nissan, Suzuki and Toyota, which will launch its Yaris eco-car later this month. 

One of the requirements of the first eco-car project was that manufacturers must be able to produce 100,000 vehicles annually from the fifth to eighth production year, which is targeted at supporting the parts industry. 

“This is something that Mitsubishi has already achieved, with combined production of 14,000 cars per month,” Murahashi said. 

Thailand is the production hub for the Mirage, and apart from the 4,000 units per month made for the domestic market, 10,000 units per month are being manufactured for export markets, he revealed. 

Mitsubishi produces 400,000 vehicles per year, 300,000 of which are exported, making it the second-largest auto exporter from Thailand after Toyota. Domestic sales have also been growing for Mitsubishi. The automaker sold 40,000 vehicles in 2010, 70,000 in 2011 and 130,000 in 2012. The company plans to sell 100,000 to 110,000 vehicles in Thailand this year. 

“We have already sold 800,000 vehicles from January to September and we could end the year selling 100,000-110,000,” he said, adding that Mitsubishi originally planned to achieve a 10-per-cent market share but would have to be content with a 9 per cent this year. 

However, auto companies “aren’t happy”, according to Murahashi. 

The automobile market has grown to become highly competitive, and automakers need to cough up profits in order to attract customers with sales promotions that offer more privileges than the now-completed First-Car-Buyer incentives. He said that although automakers enjoyed tremendous sales growth due to the First Car scheme, there are negative impacts that will be felt. 

“Big jumps usually cause more negative effects than positive ones. Unstable growth, for instance from the 800,000-vehicle sales in 2011 to 1.4 million in 2012 will see 2013 sales dropping to 1.2 million vehicles since future demand was gobbled up by the project. This is not a good way to control the economy,” he felt. 

Murahashi said that although parts suppliers are not heavily affected by lower domestic demand due to export opportunities, dealers may feel the pinch. “This has made us – and particularly our dealers – not so happy,” he revealed. 

According to reports, as many as 130,000 of the 1 million applicants for the First Car scheme have yet to exercise their rights in getting back up to Bt100,000 from the government, while 20,000 have cancelled orders. 

Mitsubishi is one of the companies feeling the negative effects of the scheme. In the northeastern region, as many as 80 per cent of its First Car applicants have dumped their applications, forcing Mitsubishi dealers to raise marketing budgets to attract new customers. Besides garnering support from Mitsubishi, northeastern dealers are raising their marketing funds by as much as 50 per cent for special sales promotions, such as a Bt9 down payment. 

“The market situation is very difficult due to the First Car scheme though a large number of customers have decided to waive their rights since they don’t think they can afford it, and the government did not set a deadline for car delivery,” Murahashi said. “In fact, we think the scheme has generated false demand. After talking to our dealers in this region, our main concern was the high inventory of vehicles held by the dealers, so we decided to lower production and help our dealers manage their stocks so that they can return to the normal inventory level. This includes supporting them with sales promotions and various customer activities,” he said, adding that inventory levels have now reached a normal level of slightly more than one month.