Thailand's Excise Department is looking to overhaul the current tax structure for vehicles with a goal to increase incentives for environmentally friendly and fuel-efficient cars.

Areepong Bhoocha-oom, the department's director-general, said a committee representing the finance, energy, natural resources and environment and justice ministries would be formed to oversee the tax review. Also represented on the committee will be officials from the National Economic and Social Development Board, the Federation of Thai Industries and the Thai Chamber of Commerce.

"The past five years have seen tremendous changes in the auto industry, particularly in terms of technology," said Dr. Areepong. "We need to consider what the right tax structure is for the future."

Cars sold in Thailand have long been taxed on the basis of engine size and horsepower, with passenger cars taxed from 30% for cars with engines under 2,000cc and less than 220 hp to 50% for cars with engines over 3,000cc and over 220 hp. Pickup trucks are taxed significantly less, starting at 3%, under policies aimed at supporting development of the light pickup market.

Preferential rates are already offered for cars using new technologies and fuel systems. Hybrid electric, electric and fuel cell-powered vehicles are charged a 10% tax rate, while the new eco-car class, featuring petrol engines smaller than 1,300cc, will be taxed at 17%. Lower rates are also offered for NGV (natural gas for vehicles) systems or those compatible with E20 ethanol-petrol blends.

Dr. Areepong said the Excise Department would also consider ways of helping car manufacturers increase their use of Thailand as a global production base.

Toyota Motor Thailand recently proposed making the country a manufacturing hub for passenger car exports worldwide. Toyota exports Thai-made pickups to 109 countries, but exports sedans only to ASEAN and Australia. "In any case, any help would probably not represent measures giving an unfair advantage to Japanese manufacturers over other producers," said Dr. Areepong.

The auto industry is on track for a record year, with the Automotive Industry Club last month increasing its full-year production estimate to 1.56 million units, 56% higher than total production last year. Domestic sales are projected to rise 50% from last year to 670,000, with exports up 61.2% to 890,000 units.