The government policy to promote the country's automotive industry as a hub for electric vehicles (EV) has Toyota Motor Thailand, the local unit of the Japanese car maker, optimistic about future hybrid car manufacturing here.
That is a major task for newly appointed president Michinobu Sugata, who replaced Kyoichi Tanada in April.
Mr Sugata's job covers all business units of Toyota in Thailand, ranging from production and distribution to exports and R&D.
He has granted the Bangkok Post his first media interview regarding future hybrid projects and his personal goal to mobilise Toyota's business in Thailand.
Mr Sugata said there are several obstacles in improving the hybrid car market.
Before the Board of Investment announced new promotional privileges for hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs) in late March, Toyota had already started to localise hybrid car assembly at its Chachoengsao plant in 2009 with the Camry sedan. In 2010 assembly of its popular Prius model started here. Both are sold in Thailand.
Toyota decided to suspend assembly of Prius in August 2015 after Thai authorities alleged Toyota had understated its tax obligation by claiming the hybrid car was a completely knocked-down vehicle despite importing most of its finished parts from Japan.
Mr Sugata said Toyota has sold 53,656 hybrid models as of August this year, mainly the local-made Camry, while the rest are Prius, imported Alphard minivans and some Lexus models.
Toyota boasted its largest sales of 18,944 units in 2012, representing 3% of the total passenger car market, before dropping consecutively each year until 2016 with 2,959 units sold, totalling only 1%. The unavailability of Prius over the past two years was one of the key factors for the sales contraction.
Mr Sugata said Toyota still has a small share of the hybrid market because of limited options for Thai customers, who are still reluctant to buy hybrid batteries at prices viewed as relatively high when compared with other luxury cars.
"The initial prices would not be the key reason if customers had enough trust in the trading value of hybrid vehicles on the second-hand market, but unfortunately, they don't have it yet," he said.
"We have to take care of this issue to sell more hybrid vehicles to the public."
But Mr Sugata said Thailand's ambitious EV policy is likely to provide a great opportunity for the segment.
Toyota is the first company that has applied for and received BoI privileges. The firm assembles 7,000 HEVs a year, makes 70,000 batteries for electric cars and also produces other parts such as doors, bumpers and front/rear axles totalling 9.1 million units a year.
The company's total investment stands at 19 billion baht, while Toyota expects to rely on domestic parts worth 13.3 billion a year, according to the BoI's announcement.
"I think we'll have opportunities by increasing the number of hybrid models and communicating in terms of the benefits of hybrid cars and other eco-friendly vehicles," he said.
"We try to do our best by utilising the efforts from the government to expand the hybrid market locally, although, they have not been enough to fully elevate the market.
Employees work at an assembly line in the Toyota manufacturing plant located in Chachoengsao province, east of Bangkok.
Mr Sugata said Toyota Motor Thailand is discussing future projects with parent firm Toyota Motor Corporation, adding that the company will produce more new models for the Thai market. He said the details of those projects will only be disclosed in several years' time.
At the global level, Toyota now has a wealth of EV technology, covering HEVs, PHEVs, BEVs and the latest fuel-cell electric vehicles (FCVs).
Toyota Mirai FCV cost ¥7.24 million in Japan, $57,500 in the US before other fees and €60,000 before VAT in Germany.
Toyota's most popular EVs are still HEVs and PHEVs, having sold over 10 million units as of January, with 34 HEV models and one PHEV -- the 4th generation Prius. The company has sold hybrid cars in over 90 countries.
Toyota is now running hybrid assembly lines in 12 countries -- Japan, the US, Canada, England, France, Australia, China, Taiwan, Thailand, India, Malaysia and Turkey.
In South and Southeast Asia, Toyota revealed that Malaysia had the largest accumulated sales volume of Toyota hybrid cars in 2016, followed by Thailand, Singapore and India.
Thai EV market: long way to go
Mr Sugata said Thailand is unlike countries such as Japan, the US and Europe, where EVs are now very successful. The three major reasons that prevent EVs from taking off are consumer sensitivity to different fuels, insufficient government support and the lack of variety in the hybrid car market.
"In Japan, Toyota took 20 years to popularise hybrid vehicles, so the 20-year timeline may be a benchmark for the Thai market as well, but it depends on future demand," he said, adding the first Toyota hybrid car, Prius, was launched in 1997 with 300 units sold. At present, Toyota has sold 4.85 million hybrid cars in Japan.
But the Japanese government used to provide ¥100,000-250,000 in subsidies for hybrid cars during the aughts. Now it offers ¥200,000 for PHEVs and ¥1,000 per kilometre for BEVs.
All EVs sold in Japan are subjected to a 5% taxes break.
"One has to go step by step to develop the Thai hybrid market because Toyota cannot make all models under the hybrid platform to serve customers," he said.
With the help of the excise-tax discount, it may be an opportunity to expand the hybrid market in the near future," said Mr Sugata.
Sustainable growth
Mr Sugata said 2017 has witnessed a rebound in the Thai car market after a four-year contraction from the Yingluck Shinawatra government's first-time car buyer scheme.
He forecasts the market to grow by 8% to 830,000 units sold in 2017, while Toyota aims to sell 265,000 units, up 8.1% from last year.
For Toyota's car exports, Mr Sugata said the company cannot avoid external risks, particularly an export contraction in the Middle East that has also kept pressure on Thai vehicle shipments, which mainly relies on pickups.
Although Toyota is now the top vehicle exporter in Thailand, now representing 26.5% of overall vehicle exports, it aims to ship 291,000 units this year, down by 9% from the previous year.
"My goal is to catch up with Toyota's strengths in the domestic market. We expect gradual growth, not rapid, just as we don't want to see a quick drop," he said.
"The sustainable outlook in terms of sales volume and profitability will also help strengthen our local operations. Toyota has to be well-prepared for the next 3-4 years, when the local market and export sector start growing again."