The Industry Ministry is confident that automobile production will reach 2.1 million units this year and is predicting the country will be one of the top 10 producers of cars in the world.
M.R. Pongsvas: Cars are core Thai industry
"The automotive industry is our core industry, generating 360 billion baht of exports a year and employing 350,000 workers. It's clear that government policy will support Thailand in becoming the top producer in Asean and one of the top 10 in the world," said Industry Minister M.R. Pongsvas Svasti.
The International Organisation of Motor Vehicle Manufacturers said the world's total motor vehicle production rose by 3.2% to 80.1 million units last year.
China was the world's largest producer with 18.4 million units, while France was 10th with 2.29 million.
Thailand's vehicle production is forecast at 2.1 million units this year, up from 1.46 million last year.
Exports are estimated at 1 million units this year, while domestic sales are forecast at 1.1 million units.
Thailand was ranked 14th in the world in auto production last year, a drop from 12th in 2010.
The floods last year caused parts shortages and production halts, costing the industry about 350,000 units and 210 billion baht worth of production.
"Sales in 2012 will increase by 38.5% as back orders are transferred over to this year, and many people whose cars were damaged by the flood will buy new cars," said Suparat Sirisuwanangkura, chairman of the Federation of Thai Industries' automotive industry club.
He said the government's programme offering tax refunds for first-time car buyers, raising government officials' salaries to 15,000 baht a month and increasing the daily minimum wage will all help to boost demand.
"If there are no disruptions, we will see production of at least 3 million units a year from 2017," said Mr Suparat.
He said the government needs to strike a balance between ethanol, biodiesel and natural gas use.
Demand for diesel is currently at 50-60 million litres per day, more than twice the demand for petrol.
"If we want to lower energy use, then we'll have to focus also on increasing diesel production, which will clearly lower crude oil imports," said Mr Suparat.
M.R. Pongsvas said the carbon dioxide (CO2) excise tax rate for vehicles will be implemented this year.
The government will give businesses two or three years to adapt after the implementation of the policy, but Mr Suparat said the ideal period should be 3-5 years.
He said since large engines generate a higher quantity of emissions, the government could tax makers based on all the cars produced.
A company manufacturing cars that emit high levels of CO2 would have to compensate by producing ones that emit lower levels, he noted.