Bangkok’s bad air driven by car-making success
Forward-looking policies promoting electric and hybrid auto production could soon have Thailand's polluted capital breathing easier
During Thailand’s February-April hot season, when the winds off the Gulf of Thailand die down and there is little rainfall, air pollution in the capital, Bangkok, is often palpable.
In mid-February, the situation got so bad that the government’s Pollution Control Department advised residents to stay home, especially those who suffer from asthma and other respiratory ailments. Some Bangkok schools were closed.
The main pollution culprit, according to the Bangkok Metropolitan Authority, is the capital’s notorious traffic, which spews out tiny particles from exhaust pipes of automobiles, especially those using diesel engines. Diesel-fueled cars account for approximately 25% of the city’s 9.7 million registered vehicles, about one per registered resident.
Particle matter dust (PM2.5, or particle smaller than 2.5 microns) on February 14 measured in Bangkok more than 72 micrograms per cubic meter (pcm), far above the World Health Organization’s recommended average of 10 micrograms pcm.
To be sure, Bangkok’s average air pollution has not reached the noxious levels of Beijing or New Delhi. But despite years of trying to tackle the issue it remains a public health challenge.
While successive governments have attempted to alleviate traffic and air pollution, primarily by building mass transit systems to offer alternatives to personal vehicles, part of the problem is due to past policy successes in turning Thailand into the so-called “Detroit of the East.”
The investment promotion campaign, launched in the 1990s, has over the years attracted nearly all the world’s major automotive manufacturers to the kingdom through generous tax incentives.
Like many Southeast Asian countries, Thailand introduced a local parts content requirements on locally assembled vehicles in the early 1980s that encouraged local manufacturing of automotive parts, especially for one-ton pickups that traditionally account for about 50-60% of sales on the domestic market.
Domestic pickup production was also encouraged by lower than average excise taxes, which has helped to turn Thailand into the world’s second largest one-ton pickup manufacturer after only America (all major Japanese brands are manufactured in Thailand) and a major exporter of the vehicle type.
Pickups, an all-purpose vehicle particularly popular in the countryside, use diesel fuel, now blamed in part for Bangkok’s worsening air pollution. But don’t expect any government, elected or coup-installed, to end tax privileges to local pickup production any time soon.
“You cannot get rid of the pickup truck support,” said Wichsinee Wibulpolprasert, research fellow on energy and environment issues at the Thailand Development Research Institute, a Bangkok-based think tank. “Unfortunately, it is the poster child of Thailand’s success and would be politically impossible.”
Thailand produced about 1.98 million vehicles last year, with 871,650 sold on the domestic market (up 13% year-on-year) with the remainder exported, accounting for about US$28 billion in foreign revenues, or 12% of the country’s total exports of US$236 billion.
One-ton pickup trucks accounted for nearly 50% of the domestic sales in 2017, and a similar percentage of exports. That amounts to a lot of diesel-based dust particles spewed into Thailand’s atmosphere last year.
Encouraged by its success in promoting local pickup truck production, Thailand introduced tax incentives in 2007 for the local production of eco-cars, small-engine vehicles with low fuel consumption that meet European standards on carbon emissions.
The program drew nine multinational auto producers, including Japanese leaders such as Toyota, Honda, Nissan, Mitsubishi and Suzuki. All are required to produce 100,000 eco-cars each over a five year time frame to qualify for the offered tax incentives.
Despite initial skepticism about the program, it proved a surprise success for most.
“Back then many people said it is not going to work, but now in 2018 we see that this was a good investment — not only from a selfish manufacturing point of view, but it was a good investment for Thai society and Thai consumers as well,” said Antoine Barthes, president of Nissan Motors (Thailand) Co. Ltd. Nissan launched its March eco-car in Thailand in 2010, pioneering the market.
Eco-car sales were spurred on by the populist first-car sales policy of former Prime Minister Yingluck Shinawatra, which reimbursed the excise tax (about US$3,000) on first-time car purchases once buyers had completed payments. The policy helped boost total production to 2.4 million and domestic sales to surpass one million in 2012 and 2013, exacerbating Bangkok traffic and household debt levels in the process.
Eco-cars or not, more cars using internal combustion engines on Bangkok’s already congested roads means more traffic and ultimately more air pollution.
In partial response to the pollution problem, in 2016, the Thai government launched a new automotive industry promotion package which aimed to encourage manufacturers to produce electric vehicles (EVs) locally with a combination of Board of Investment (BOI) tax incentives and reduced excise taxes on vehicles with low carbon emissions.
The scheme, details of which were finalized in March, 2017, aims to keep Thailand’s foot in the door as an automobile production base for new technology cars, while reducing air pollution and carbon emissions at home.
EVs have been grouped under the so-called S-Curve, high-tech industries that the government is promoting to keep Thailand competitive. It is one of the few S-Curve sectors to have gained traction. Toyota Motors was the first to bite, applying for BOI privileges to produce hybrid electric vehicles (HEVs) last year.
Germany’s Mercedes Benz and BMW have also put in applications for BOI privileges to invest in battery production for their locally assembled plug-in hybrid electric vehicles (PHEVs), which are already assembled in their local plants.
Last year, Mercedes sold about 5,000 PHEV models on the Thai market, while BMW sold more than 1,000 units of its PHEVs. Mercedes is expected to subcontract out its battery production, since no auto manufacturers make their own batteries nowadays. But BOI tax waivers would ultimately make their locally produced Benz models cheaper.
“The combination between production incentives and incentives for the final consumer [lower excise taxes] is the right approach,” said Michael Grewe, President and CEO of Mercedes Benz Thailand Co. Ltd., of the government’s EV taxation policy.
So far Honda, Mazda, Nissan, Suzuki have also expressed interest in the scheme. All four already have production facilities in Thailand with large networks of local parts suppliers in place.
However, none of the manufacturers has proposed an EV one-ton pickup model. Such a design would be best for tackling the kingdom’s carbon emissions, since pickups account for about 60% of all vehicles on the road and with diesel-based combustion engines they are the biggest polluters.
Ultimately the best way for Thailand to reduce vehicle-based pollution is to encourage more people to use public transport systems and stop driving their own cars.
The current military regime is investing heavily in the expansion of the capital’s existing Skytrain and subway systems, but a lot more could be done to make connectivity to the systems more convenient for commuters.
“I think it’s a toss-up between private transport and public transport,” TDRI’s Wichsinee said. “As long as we have a sucky public transport system people will stick to their cars. You need to make the metro system a time-saving option — now it takes about the same time as driving a car.”
That — and the notion that driving your spiffy new EV Mercedes or BMW to the office is a lot more prestigious than rubbing shoulders with the hoi polloi on the Skytrain — has to change if Bangkok is ever to breathe easier.