Thailand is expected to produce 800,000 units annually of energy-efficient 'eco-cars' according to industry sources.

The Bangkok Post said that the OEMs would likely include Volkswagen, which is reportedly moving a planned investment from Malaysia.

Vallop Tiasiri, president of the Thailand Automotive Institute, said that seven eco-car projects, six of which have been approved by the Board of Investment (BoI), were targeted to come on-stream by 2015.

By then, about 800,000 units of the small cars would be produced in Thailand, of which 600,000 would be exported.

The BoI to date has approved eco-car investment proposals by Honda, Suzuki and Nissan of Japan for annual production of about 120,000 units each. Early this month the agency also approved plans for about 100,000 units a year each by Mitsubishi, which aims to export 80% of its output, India's Tata Motors and Toyota of Japan.

Volkswagen had also confirmed its intention to produce a small car in Thailand with a total investment of 27 billion baht. However, its final manufacturing plan had yet to reach the BoI, according to Mr Vallop.

"Volkswagen has been looking to have a manufacturing base in Asean in addition to the company's huge production in China," he said.

The German carmaker is considering Thailand after failing to form a partnership with Proton, the Malaysian national car company, he added.

So far, none of the eco-car developers has confirmed when the first units would be rolled out. The tax incentives for the environmentally friendly vehicles would take effect by October next year, Mr Vallop said.

Under the eco-car investment promotion scheme, the excise tax on the cars would be only 17% compared to the normal rate of 30%.

To be eligible for tax incentives, the cars must have engine sizes of no more than 1,400cc, must comply with the Euro 4 emission standards and must consume no more than one litre of fuel for every 20 kilometres.

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