Suzuki has underlined its determination to participate in Thailand's eco-car project by starting construction of a new automobile plant in Rayong.

The Japanese automaker held the ground-breaking ceremony for the new plant on Monday. It plans to invest 7.5 billion baht to build facilities for pressing, welding, painting, assembly and engine production.

Suzuki is due to start producing eco-cars with 1.3-litre gasoline engine from early 2012, initially at 10,000 units per year.

The eco-cars will be 70% for the domestic market and production should hit 100,000 units per year in the fifth year of operations, as required by the Board of Investment, which approved promotional privileges for eco-cars in December 2007.

Meanwhile, Suzuki has started shifting its automobile sales operations from its current distributor Suzuki Automobile Co (SAT) to the newly formed Suzuki Automobile Manufacturing Thailand Co (SAMT), a move seen as an effort to end Suzuki's 35-year business relationship with the Phornprapha family.

Nissan vehicles and Yamaha motorcycles, both formerly run by the Phornprapha family, have also been taken over by their Japanese parents.

An industry observer was unsure if there had been conflicts within SAT but said the formation of SAMT, 100% owned by Suzuki Motor Corporation, would prepare for the launch of eco-cars.

SAMT was established in April 2008 to handle all automobile activities - both manufacturing and distribution - in the Thai market. SAT's sales operations will be gradually shifted to SAMT. After-sales and spare parts service operations have already been transferred to SAMT to assure Suzuki customers that services will not be disrupted.

"We have not yet discontinued the partnership with the Phornprapha family but are considering the pros and cons for Suzuki to continue or discontinue our relationship with the existing local partners," said SAMT president Takayuki Sugiyama.

SAMT will distribute the new imported Swift compact sedan, launched at the current Bangkok Motor Expo, while SAT continues to sell existing models such as the APV compact multi-purpose vehicle, the Carry small pickup and the Vitara compact sport utility vehicle (SUV).

Mr Sugiyama said Suzuki had set a timeframe for SAT to merge with SAMT by 2011, one year before the eco-cars are launched. All Suzuki automobiles will be distributed under SAMT in 2011.

SAT currently oversees 44 dealers nationwide but SAMT will recruit some of them to become its authorised dealers to sell Swift sedans. The remainder will be appointed later if they meet Suzuki's qualifications.

About 60 dealers should be appointed in 2012, the year Suzuki eco-cars has hit the market. A total of 100 dealers should have been appointed by 2015, when the second generation of eco-cars is launched.

SAMT is due to soon raise its registered capital to 7 billion baht, from 5 billion baht now, in preparation for the eco-car project.

The Phornprapha family, led by Mr Phornphong, formed SAT in 2003 as a joint venture with registered capital of 400 million baht. Suzuki Motor Corp held 60% and the Phornprapha family 40% - 20% by Mr Phornphong and 20% by the family's Siam Motors Group.

By replacing Siam International Co, the authorised distributor 100% owned by the Phornprapha family, SAT gave Suzuki a greater say in the local market as it turned Thailand into its production base for small four-wheel drive and passenger vehicles.