Recently the drive for E85 gasohol has become the most talked about topic in the Thai
automobile industry, with Ford, Chevrolet and Volvo showing tremendous interest.

E85 gasohol is a mixture of 85 per cent ethanol with 15 per cent gasoline which dramatically
helps lower the dependency on crude oil, and the technology is already available in many
parts of the world.

However the three companies were disappointed with the government’s recent offer for E85
vehicles which turned out to be no different to what is already being given to E20 vehicles,
with a 5-per cent reduction in excise tax.

According to the Cabinet resolution, the privileges for E85 vehicles are as follows.

- Engines under 2,000cc – 25 per cent excise duty (down from 30 per cent)
- Engines from 2,000 to 2,500cc – 30 per cent excise duty (down from 35 per cent)
- Engines from 2,500cc to 3,000cc – 35 per cent excise duty (down from 40 per cent)

Meanwhile, the excise duty on gasohol E85 will be lowered from Bt3.6850 per liter to Bt2.5795
per liter and the import duty for E85 modification components not available in Thailand are to
be lifted for three years.

This will cause the retail price of the E85 vehicles to drop by approximately Bt150,000, while
the Ministry of Energy expects that the country will save about Bt10 billion on oil imports per
year.

However, companies backing the E85 drive are disappointed with the offers given, which are
not much different to those offered for E20 vehicles resulting in the questioning of the motive
in producing such vehicles and the support for E85.

Japanese companies accept decision

Adisak Rohitasun, senior vice president of Asian Honda Motor Co. Ltd., Honda’s regional
headquarters for the Asia-Oceania region, said the E85 promotion looks interesting, but
time is needed for implementation and encouraging auto makers to start offering E85 models.

He said Thailand initiated the E20 promotion earlier this year, while the government and
automobile companies originally agreed that the E85 usage will commence in three years.

He said if the plan was to be quickened, the both sides would have to meet to discuss the possibilities.

“Actually Honda has experience with E85 in Brazil where ethanol is widely used. In Brazil, the
Civic and Jazz has been modified for use with E85 but for Thailand, the standard has reach
only E20 since the start of this year and in order to step up to E85, we need time for the
design, production and marketing since Honda vehicles sold in Brazil have different engine specifications and emission levels,” he said.

Suparat Sirisuwannakura, senior vice president at Toyota Motor Thailand Co. Ltd. and
president of the Thai Automitive Industry Association (TAIA), said: “In the past TAIA explained
to the government that there should be no promotion for E85 with fully-imported vehicles
since there is no benefit for the automobile industry on the whole, but it should promote
local production of such vehicles. It is expected the auto makers will be ready for production
of E85 vehicles in 1-2 years depending the readiness of each company. For Toyota, although
we produce the E85 Corolla in Brazil, we do not plan to import this version for Thailand.”

He added that the tax break for E85 offered by the government is beneficial to the local industry
and motorists, and helps encourage local production instead of imported vehicles.

The lifting of E85 components for three years also helps lower production costs while the
excise duty reduction on E85 fuel also helps consumers to buy cheaper E85 fuel. He also
said that the 25-per cent E85 excise duty for vehicles with engines not exceeding 2.0 liters
does not affect the Eco Car project in which the excise duty is 17 per cent.

European brands show disappointment

Paul Stokes, president of Volvo Car Thailand Co. Ltd., said Volvo has been supporting the
Thai government’s promotion on alternative fuels throughout and is disappointed to learn
about the announced promotions for E85 vehicles.

“These promotions do not help support automobile manufacturers to import, manufacture or
develop E85 technology in Thailand,” he said.

“In addition, as a major ethanol producer, Thailand may lose both economic and environmental opportunities,” he added.

Nevertheless, Volvo will continue to bring in E85 vehicles for testing in Thailand. “But we have
not decided to sell them in Thailand, since we have to test the quality of E85 in Thailand first.
At the same time, we feel that the excise duty for E85 vehicles should be lower than 20-25
per cent,” he said.

“If it is lower, then we can start the E85 project in Thailand and will be ready in one and a half
to two and a half years,” he concluded.

Saroch Kiatfuangfoo, senior vice president at Ford Thailand Co. Ltd., said the cabinet decision
on the E85 policy will surely be a disappointment for Thai consumers who are looking for
alternatives to high oil prices.

“Sustainable fuel sources, like E85, have allowed other countries, such as Brazil, to achieve
energy security. The minimal incentives offered will not encourage Thai consumers to make
the important switch to sustainable E85 fuel and will affect the future energy security of
Thailand,” he said.

In addition, the next question that needs to be considered is the retail price, since E85 results
in 28-30 per cent higher fuel consumption.

“So setting the right E85 fuel price is an equally important factor that needs to be considered carefully,” he said.

Liam Benham, vice president for government affairs for Asia-Pacific, Ford Motor Company, said
that the Thai government’s offer for E85 is not enough to encourage E85 production in Thailand.

He said the ideal excise duty rate should be between 17 to 20 per cent and should be lower
than the E20 rate, since E85 is an urgent policy and requires more incentives.

“Ford is technologically ready and will bring in 1,000 E85 vehicles for testing in Thailand at the
end of this year. But production will depend on the tax incentives. The incentives offered by
the Thai Cabinet are not very encouraging,” he said.

However, he said that due to the continuously increasing oil prices, chances of E85 are
increasing.

“But after the cabinet decision, every company has to go back and calculate whether it is
worth the investment,” he said. “E85 is a highly suitable energy for the present situation
and although Ford is technologically ready, time is needed to study the project before making
a decision.”

Policy: Toyota announces Camry Hybrid production in Thailand

Toyota has finally announced that it will start producing the Camry Hybrid passenger car in
Thailand at its Gateway plant in Chachoengsao province starting in 2009, a move that will
strengthen its leadership in the midsized sedan market in Thailand.

Simultaneously, the company also announced that it would produce the Camry Hybrid in
Australia, which is the other production base for this model. Initially Thailand will produce
9,000 Camry Hybrid cars per year while production in Australia, where 1 million vehicles
are sold annually, will be 10,000 units per year.

Toyota first launched its Prius hybrid car in 1997 and since then started to expand the hybrid powertrain to other models including the Camry.

Accumulated sales of the Prius have reached 1 million units, and last year Toyota sold a total
of 430,000 hybrid vehicles globally. The company, which is expected to surpass GM as the world’s largest auto maker this year, plans to sell 100,000 hybrid vehicles per year by the early 2010s.

According to Mitsuhiro Sonoda, president of Toyota Motor Thailand Co Ltd, domestic production
of the Camry Hybrid could be raised if there is more demand.

He said Toyota decided to choose the Camry to fit the hybrid system because of it high cost-effectiveness.

An investment of Bt90 is being made at the Gateway plant to adjust the assembly line so that
the hybrid system could be assembled to the Camry, he said.

Prior to the announcement the Camry Hybrid has been tested in Thailand comprehensively,
while for after sales servicing, dealerships are being trained in terms of hybrid technology
knowhow, according to Wichien Emprasertsuk.

“We have been selling the Lexus RX 400h, which is a hybrid vehicle, in Thailand for some time
and the knowledge will be transferred to Toyota dealers,” he said.

Although initially the battery and motor units for the car will be imported, the Thai government
is working with Toyota in encouraging the company to start manufacturing the hybrid system
locally.

“During the first stage the hybrid system has to be imported, but in the future we want it to be
made in Thailand,” Sorayut Phettakul, Advisor to the Minister of Industry (MOI), said.

According to Surayut, the Ministry of Industry is trying to convince auto makers to produce
hybrid vehicles in Thailand by handing out special privileges.

He said Toyota favors Thailand in the production of hybrid cars despite its commitment in other countries such as China where it produces the Prius Hybrid.

“For Thailand, we want Toyota to produce a smaller hybrid car apart from the Camry,” he said.
“We want to convince Toyota to put the hybrid powertrain of the Prius into a smaller production
car such as the Corolla Altis.”

This would make the technology more accessible to the majority of car buyers in the country,
as well as helping to increase economy of scale.

“We have talked to the Board of Investment about offering privileges for companies that
produce hybrid vehicles in Thailand, and if we get an early sign, we can start working out
investment privileges,” Sorayut said.

He said Industry Minister Suvit Khunkitti has been talking to the Customs Department about
lowering import duty for hybrid systems, to help narrow the price gap between hybrid cars
and normal models.

Presently the excise duty for hybrid vehicles is only 10 per cent, compared to 30 and 35 per
cent for regular vehicles with engine capacity below 2.0 liters and 2.5 liters.

The Camry, including other Toyota passenger cars, already enjoy a 5-per cent excise duty
reduction due to its compatibility with E20 gasohol.

He said Thailand is unable to offer a sizeable subsidy such as Australia, which will give Toyota
US$37 million for research and development of hybrid vehicles in order to cut emissions blamed
for global warming as well as revive its ailing auto industry.

“But we can offer indirect help in the form of lower import duty and investment privileges,” he
said.

Sonoda said that presently there are no concrete plans to put the hybrid system into smaller
Toyota models “For the Corolla Altis or other small models, we haven’t even started the
development stage yet so we can’t tell you when we can start producing these vehicles,”
he said.

“However since Thailand is one of the few countries in the world that we produce hybrid
vehicles, if we want to increase the variations of the hybrid vehicle, this would be the country
that we start a new model,” he added.

On the other hand, Toyota is developing a retrofit CNG version of the Corolla Altis, which would
be introduced in September this year.

The main target will be the taxi market, with sales of 800 units per month expected, according
to Wichien.