Camry Hybrid Reveals Thai Government's Bias Towards Japanese?

This piece of news is about a month old. So let's get the basic facts out of the way first.

1. Camry Hybrid to be launched in Thailand by July 2009.
   
2. Assembled at Toyota Motor Thailand's Gateway plant in Chachoengsao province.
3. Indicated price is no more than THB 100,000 above a regular Camry 2.4V which tops at around THB 1.7 million. This low price premium is due to special tax incentive provided by the Thai government. The range topping Camry 3.5Q retails at THB 2.9 million.
4. No further details on the powertrain adopted but it is understood that this is the same 2.4-litre 4-cylinder Atkinson cycle engine used in the US and Japanese market Camry Hybrid and Lexus HS250.
5. Under a new tax incentive by the Thai government to promote adoption of hybrid cars, the Thai built Camry Hybrid will be entitled to a lower excise duty rate - 10% instead of at the normal 35% rate. Import of hybrid CKD packs including hybrid batteries and electric motors from Japan are exempted from import duties under a separate Japan-Thailand Free Trade Agreement.
6. TMT invested THB 320 million to install another assembly line and tooling equipments to assemble the Camry Hybrid.
7. The engine is E10 gasohol compatible, but not E20 compatible. Which is odd given that all regular gasoline Toyota models sold in Thailand are E20 compatible.
8. Export destinations include India (confirmed) and ASEAN countries (unspecified markets).

Some European car company executives in Thailand are not too happy with the recent development, which they see as a thinly disguised protectionism for Toyota. Mercedes is quick to point out that long before alternative fuel vehicles became mainstream, it has already begun building the bi-fuel CNG and petrol powered E200 NGT. GM Asia-Pacific too have started selling OEM fitted CNG kits for its Optra sedan and Silverado truck while Ford pointed out that it has already introduced the clean diesel Ford Focus 2.0 Duratorq TDCi. Even our very own Proton sells a bi-fuel CNG-petrol powered version of the Persona sedan in Thailand. Currently the highly economical and low emission clean diesel models from BMW and Mercedes-Benz do not enjoy any preferential tariff. The 2.0-litre diesel BMW 320d and 520d is subjected to 30% tax while the 2.2-litre Mercedes-Benz C220 / E220 CDI is taxed at a higher 35%.




OEM fitted CNG models like this bi-fuel Mercedes-Benz E200 NGT meant that these cars can be refueled like any regular car.





Toyota have a very strong following in Thailand and unlike many markets, Thai drivers are more acceptable to see large Japanese sedans as a rational and wise alternative to entry level premium German sedans. Case in point is the Camry 3.5Q V6 and the very comfortable Nissan Teana (which is a personal favourite of this author for a Japanese sedan to be chauffeur driven in). So the Germans are feeling the pinch from the Camry Hybrid.

CNG powered vehicles are also entitled a lower of 20% instead of the normal 30% - 40% for passenger cars. However this is still higher than the 10% enjoyed by the Camry Hybrid. Currently CNG tanks and related components are also exempted from import duties but this is only temporary and will expire by 2011. Thus manufactures are not willing to commit more for the long term. The BMW 320d/520d uses a 2.0-litre diesel engine and is subject to 30% tax, while the Mercedes-Benz C220/E220 CDI utilises a larger 2.2-litre diesel engine faces 35%.

While the rules for tax breaks / exemption don't appear to be tailored solely for Toyota (Honda could easily benefit from the same), they do seem to be tailored to match the comparative advantage held by Japanese automakers. The Japanese are strong in hybrids, while Germans tend to be strong in diesels. Thailand is not a major supplier of hybrid components nor do they have any large domestic battery manufacturing industry to support, so one has to wonder why should the Thai government subsidize the world's richest car company to build a hybrid car there? Surely this cannot be for environmental reasons, as CNG and diesels provide just as good fuel economy and mileage, if not better. Plus, the Gulf of Thailand has a large reserve of natural gas.

With such low taxes, Toyota does not even bother adapting the Camry Hybrid's petrol engine to be E20 gasohol compatible. Since the additional E20 compatibility will not lower the excise duties any further than the current level (E20 compatible cars pay 25% excise duty instead of a minimum 30% for normal passenger cars). Instead it only increases the cost of the vehicle. So why bother. And what was the point of hybrid vehicle incentive again? Environment?

Executives in the domestic Australian car industry also echo the same sentiment when Prime Minister Kevin Rudd approved a AUD 500 million Green Car Innovation Fund to promote development of alternative energy cars - out of these AUD 35 million is provided to Toyota to build the Camry Hybrid at TMCA's plant in Altona. Again, Australia is not the most logical choise for hybrid car manufacturing. Like Thailand, Australia too has significant reserve of natural gas, enough for it to be independent from imported oil, with the right investment. LPG is a more logical alternative (CNG is not widely used there) and domestic car maker Holden have been pushing for this with its E-Gas bi-fuel models, but it meet with very limited success due to insufficient investment in rolling out LPG refueling infrastructure. One would think that the Australian government would at least support its domestic brand Holden rather than to subsidize one of the richest car company in the world, just to convince them to build a hybrid car locally.

Maybe Kevin Rudd's overall objective is to ensure job security of his people in the manufacturing sector. Afterall Toyota is the second largest car maker in Australia after Holden, which is a subsidiary of GM. At that point of time, the future of Holden with GM is still uncertain and plants are closing one after another amidst the looming economic crisis. As for Thailand, it is difficult to see how does the incentives given out for Camry Hybrid fits into the long term plan for the Thai automotive industry. There is no obvious need for them to favour hybrid over other forms of alternative powertrain.

At the end of the day, it goes back to the powerful Japanese government trade and industrial lobby groups that backs Toyota's interest all over the world. You wouldn't expect Kevin Rudd or the Thai Board Investment to ring up Watanabe-san directly in his TMC office, or vice-versa wouldn't you? Japan have been actively wooing Asia Pacific nations to promote bi-lateral trade, which resulted in various Free Trade Agreements between Japan and other ASEAN grouping nations. Can't say the same for the European Union. German companies know this and they are pushing for their government to take greater interest in trade with fast developing nations outside of China.

If local governments are really serious about promoting environmentally friendly vehicles - the criteria should be based on data that matters like CO2 emission and and fuel economy, done on a specific driving cycle. The type of powertrain should not really matter because we are still too early in alternative powertrain development to make a decision on which technology to back, unless a country have vested interest in any particular technology. Nobody is in a good position to say one type of technology is the best compared to others.

Related link:
The great powertrain debate - diesel vs hybrid.