Thailand's future eco-friendly car.

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“To be or not to be – Thai hybrids or ethanol - that is the question”.  William Shakespeare.

Is the hybrid car the eco-friendly model car of the future? Thailand seems to believe so. 

Hybrids:

Hybrid cars are able to switch power between a regular oil fired engine and one using electricity. Toyota plans to introduce a hybrid vehicle in Thailand later this year and aims to lift its production of hybrid vehicles to 10,000 units within three to four years, according to a Japanese newspaper report. But hybrids are expensive, since they require at least two engines (depending on how many kinds of fuel they use). So far in Thailand, they are the smart cars for people with money.

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But <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Toyota also has plans to start producing eco-cars using 85% ethanol and 15% petrol (E85 cars) sometime soon.  Certainly, in Asia, these could be the cars of the future, with the Tata’s cheap Indian Nana car now in production and likely demand for the small, cheap Asian car.  E85 vehicles in Asia could depend on Brazil’s fast growing ethanol production, using sugar cane (which is much cheaper to produce than the US use of maize). 

Thailand’s approach:

Toyota was one of fourteen Thai car manufacturers that met the Thai Industry Minister, Suwit Khunkitti in June this year to discuss the future of eco-friendly cars.

The Thai government is offering to reduce the excise tax on E85 vehicles made in the country to 25% for small engines.  Many of the other companies (Suzuki, Tata Motors, Nissan, etc) have plans to make Thailand a centre for eco-car production. Tata wants to produce 35,000 pick-ups and has already marked the country as a regional hub, according to the Bangkok Post. Suzuki wants to produce 138,000 eco-friendly vehicles a year in Thailand while while Nissan plans an annual production of 120,000 units. Toyota and Mitsubishi will join Honda in receiving investment incentives from Thailand to produce green vehicles. Thai rules require a firm to make at least 100,000 vehicles a year that can run for at least 20 km per litre of fuel to receive the tax breaks.
Thailand’s approach to the future of its vehicle manufacturing sector is to offer investment incentives and tax breaks for small cars.  It has already established itself as the South East Asian hub for vehicle production. So far eco-friendly cars account for only a tiny slice of the Asian vehicle market but that is likely to change as market demand climbs and environmental issues become more urgent.

Looking Ahead:

But “nothing changes faster than the future”, as The Economist put it this week in its upbeat report on the future of alternative fuels and the ensuing changes they will bring to the motor industry. A few years earlier, everyone thought the fuel cell would lead the future for alternative energy cars.  How wrong we all were!

The Economist now reckons that, thanks to the developments and growth now occurring in the wind and solar power industries it will be the ‘plug-in’ electric car instead!   The advantage is that they can be recharged at three o’clock in the morning when demand for power is low and possibly cheaper to the consumer.  Thanks to the rapid advances now occurring on wind farms as well as the innovations being generated to harvest the sun’s energy, the price of electricity (once it is weaned off its dependence on the price of oil) from wind power and solar panels will drop dramatically. Soon it will be possible to drive decent electric cars at the equivalent of 25 cents a gallon of petrol (gas).

The price of alternatives:

The sharp price increases of oil and gas are certainly here to stay, as we near the peak of oil extraction.   But this will help to fuel the innovations that are already happening. The market for reasonably priced energy is enormous, with growth expected to double by 2050.  At present the world’s energy consumption amounts to about a tenth of world economic output.

Of course, the present tangle of subsidies offered to different parts of the energy industry makes rational comparisons difficult.  Coal is still cheap because no one (apart from Europe) has a sensible tax on carbon to represent the damage fossil fuels cause the world. If we did, then wind power would already be competitive with fossil fuels, and others would come close.  Even China is investing heavily in wind power (as well as building a huge number of coal fired power plants).  Its wind generating capacity will grow this year by two thirds and it is already the second largest solar panel maker. 

But, for Thailand’s purpose it is the comments the Economist’s report makes about ethanol that is of most interest. The US produces (and heavily subsidizes) ethanol from maize which is expensive. Brazil, on the other hand, makes it from sugar cane.  It is already the world’s second largest biofuel industry as well as being economically the most honest (it does not distort the market with price subsidies).  Brazil already provides 40% of the fuel used by its cars and plans to provide 15% of its electricity supply too, through burning sugar cane waste.  So The Economist’s report is optimistic that the changes now going on in the supply of alternative energy sources will soon become the new 21st century technological revolution.

A realistic policy for Thailand:

In Thailand, the current push is for the E85 vehicle, in the hope that the E85 will eventually fuel up to 60% of all passenger vehicles in the future.  The Bangkok Post, in an editorial on 25th June argues that it is not enough for Thailand simply to offer its vehicle industry some tax breaks and hope the manufacturers will sort out which kind of car they should produce. No one knows yet whether a hybrid car will be cheaper than a regular 100% petrol version. So Thailand needs to think carefully about a forward-looking energy policy.  This is not easy, given the current fluid state of thinking.

The newspaper points out that vehicle manufacturers are still not satisfied with the government’s incentives so far to get them to begin production on E85 cars.  And will there be enough ethanol produced to power all these vehicles?  The editorial thinks not, given that Thailand is unable to produce enough ethanol for use even in the current E20 cars.  Not only is there likely to be insufficient land for producing fuel as well as food; but the ‘carbon footprint’ so far will not make much of a difference in cutting greenhouse gasses.

Which dream?

Ethanol? Hybrid? Electric?

Thailand’s leadership needs to set its future policy wisely. Investing in a completely new vehicle industry is important, especially if it is to achieve its dream of 60% of vehicles using alternative fuels. We still do not know enough about the 100% electric car.  And, looking at the state of the current leadership, with the PAD street protests, and censure debates going on in parliament, that may not be too much to  ask.