Saturday, December 8, 2007

Suzuki to Build Thai Plant on Small-Car Tax Breaks

By Kiyori Ueno and Rattaphol Onsanit

Dec. 7 (Bloomberg) -- Suzuki Motor Corp., Japan's second- largest minicar maker, will build a 31.4 billion yen ($282 million) plant in Thailand as the government offers tax breaks to boost production of fuel-efficient cars.

The factory, due to begin operations in 2010, will make more than 100,000 cars a year by 2015, Hamamatsu, Japan-based Suzuki said in a statement on its Web site today.

Thailand has won more than $1.1 billion of investment from automakers including Suzuki, Nissan Motor Co. and Ford Motor Co. since it pledged to cut taxes on small cars from 2009. Southeast Asia's second-biggest economy wants to make more fuel-efficient vehicles to limit oil imports and boost exports.

``The Thai government is seeking to create a center of minicar production in Southeast Asia as demand for small cars is rapidly growing,'' said Hirofumi Yokoi, a Tokyo-based industry analyst for CSM Worldwide. ``It's an extremely important project for Thailand.''

Suzuki's factory, to be built in the eastern province of Rayong, will produce cars for the local market and for export. The automaker already has a plant in Thailand making motorcycles.

Tax Cuts

Thailand plans to cut the excise tax on small cars to 17 percent compared with 30 percent for regular vehicles, Finance Minister Chalongphob Sussangkarn said on June 5. To qualify, vehicles must have engines of no more than 1.3 liters and be able to travel more than 20 kilometers (12 miles) on a liter of fuel, he added.

Suzuki will receive tax breaks on its investment plan, the Thai Board of Investment said in e-mailed statement today, without providing more details. Nissan will also get support for a plan to invest 5.55 billion baht ($165 million) to expand capacity at its Siam Nissan Automobile Ltd. unit, the state agency added. The plant will have a capacity of 120,000 vehicles a year, the board said, without providing a timeframe.

Ford and its Japanese affiliate Mazda Motor Corp. announced a plan for a $500 million small-car factory in October. Honda Motor Co. won approval for the small-car tax break the same month. The company and its suppliers plan to spend 6.7 billion baht on a new auto factory and on parts-making facilities.

To contact the reporter on this story: Kiyori Ueno in Tokyo at kueno2@bloomberg.net ; Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net

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