"The eco-car incentives offered by the Board of Investment [BoI] are very interesting, but Tata sees it better to pull out, as there are too many eco-car competitors in the market now led by Japanese automakers, while Tata's sales volume is not yet enough to make the company's vehicles competitive," said Tata Thailand chief executive Sanjay Mishra.
The Indian car giant applied for the first phase of the BoI's investment promotion in 2007 but dumped the plan after failing to meet the deadline to submit project details. Tata decided instead to focus on conventional passenger cars.
The BoI has scheduled a submission deadline of March 31 for interested investors to submit eco-car investment plans for the second phase.
To be eligible for privileges, companies must invest at least 6.5 billion baht to build a new plant with annual production capacity of 100,000 eco-cars within four years of operation.
Eligible cars for the second phase must emit less than 100 grammes of carbon dioxide per kilometre.
The government will waive corporate taxes and import duties on machinery for the first eight years of operation.
Participating car makers will also enjoy excise taxes as low as 14%, with E85-compatible cars taxed at 12%.
In Tata's fiscal 2014 starting from April, Tata plans to introduce two passenger cars to the Thai market: the Nano, the world's cheapest and smallest car, and a multipurpose vehicle, the Aria, both imported from India.
In fiscal 2015, Tata plans to make available its Safari Storme sport-utility vehicle, also imported from India.
Tata originally planned to launch the Nano, which runs on a 700-cc engine, in the Thai market in 2012. But this was delayed because of the large number of Japanese eco-cars introduced to take advantage of the first-time car buyer tax rebate.
Tata will adjust certain specifications of the Nano to make it suitable for Thai customers, such as switching from manual transmission to automatic and raising the engine size to 1,000 cc.
"Tata's passenger cars will be imported first to test Thai market demand," said Mr Mishra. "An assembly plant for passenger cars in Thailand is possibly the next step once Tata's sales are large enough."
Tata Thailand runs a Samut Prakan assembly plant for pickup trucks, a joint venture with Thonburi Automotive Assembly Plant Co, at an investment cost of 2 billion baht.
The plant makes 7,500 Zenon pickup trucks a year out of a total production capacity of 15,000.
In October this year, the company plans to begin assembling the Super Ace, a commercial mini-truck, with an annual production of 2,400 trucks a year at an investment of 150 million baht.
Mr Mishra forecasts the mini-truck market to increase by 8.3% to 13,000 this year. Tata holds a 15% market share.
The pickup truck market, however, is expected to fall by 13.3% to 520,000 this year, with Tata owning a 4% market share.
For fiscal 2013 ending March 31, Tata reported a 23.9% drop in Thai sales to 3,500 vehicles.
The decline was due mainly to weaker consumption and the expiry of the first-time car buyer scheme.
For fiscal 2014, Tata will boost Thai sales to 7,000 units including locally made pickup trucks and imported passenger cars.