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The ’hidden agenda’

Bangkok Post


12 August 2005

There is more than meets the eye in the Thai-Japan free trade agreement. It may spawn benefits for more models

Japanese-made cars with engine size less than 3,000cc — but producing more than 220hp — could also benefit from the Thai-Japan free trade agreement covering imports of completely built-up cars.

Although a development in that direction could not be confirmed yet, a source at one Japanese car company said something to that effect could be incorporated by the time the pact takes force next year.

However, government sources steadfastly denied any movement in that direction.

The general understanding regarding the Thai-Japan FTA is that import tax on cars with engines over 3,000cc will be cut by 5% annually, starting next year, until 2009. The current rate is 80%.

"There is (cars with engines less than 3,000cc, but delivering more than 220hp) a hidden agenda," one source told Motoring. "It’s not big news in terms of volume (sales). But it’s a delight for enthusiasts craving for high-performance cars at attractive prices."

Although the Customs Department handles import tax at a flat rate, it is trying to emulate the Excise Department which applies 50% tax on cars with engines over 3,000cc and anything producing more than 220hp.

This is one of the reasons why many believe Mitsubishi Motors (Thailand) is reluctant to disclose specification and pricing of the pending Lancer Evolution IX, hoping to gain from the FTA.

The Evo’s turbocharged 1,997cc engine produces 280hp. Earlier, Mitsubishi had planned to offer a detuned version generating less than 220hp to enjoy 30% excise duty instead of 50%.

Parent firms in Japan, however, are usually reluctant to give specifications for just one market.

It is understood that Mitsubishi will be happier to enjoy lower import tariffs, even though the Evo must face 50% excise tax in untouched form.

Models currently on sale in the Thai market that can benefit from this hidden agenda include the Lexus GS300 (2,995cc/228hp), Mazda RX-8 (1,308cc/231hp) and Subaru Legacy (1,994cc/245hp).

Others being considered for sale in the future, but are hampered by the 220hp tax restriction, include the facelifted versions of Subaru’s Impreza and Forestor. Elsewhere, their 2,457cc engines produce 230hp.

This is not the first time intricate legal aspects have complicated the marketing strategies of car companies.

The most recent case was last year when the Excise Department introduced a new 10% rate for vehicles with hybrid powertrains.

Lexus was planning to import the RX400h hybrid-powered SUV into Thailand only to realise later that excise rules stipulated that such vehicles cannot be powered by a petrol engine exceeding 3,000cc (3.0-litre). The RX400h’s electric motors are coupled to a 3.3-litre V6 petrol motor.