Thailand’s first car buyer program gains momentum

Thailand’s First Car Buyer Program is finally picking up steam, as evidenced by the close to 145,000 vehicles purchased since the program began. Under the program, the government gives a tax rebate of up to THB100,000 (US$3,260) to first-time buyers of new cars until October this year. The deadline has been extended to December.
As many as 10,000 applications are received every month, up from 100 per month when the program was launched last year. Of the total vehicles purchased, passenger cars make up 55 %, while the rest is split between pick-up trucks and double cab pick-ups. These bring the total tax rebates to THB10 billion (US$357.6 million); the government’s goal is to sell 500,000 vehicles by the end of this year, bringing the total tax rebates to THB39 billion (US$975.5 million).
Unsurprisingly, the increasing popularity of the program has resulted in an increase in the number of vehicles on the roads. The Traffic Control and Command Centre said that the large number of new vehicles, when added to existing vehicles has increased traffic problems. The May to July figures from the Land Transport Department show that average vehicle registrations have jumped from 20,000 vehicles to as many as 50,000 vehicles per month. Records also reveal that between January and July of this year, 582,279 new vehicles were registered at the Land Transport Department, compared to 811,352 for all of 2011.
2.5 Million vehicles in 2013
Suparat Sirisuwannangkura, chairman of the Automotive Industry Group, Federation of Thai Industries (FTI), said that a large number of used cars and pick-ups have been sold in the provinces and neighboring countries at lower prices since their popularity has dropped significantly due to the First Car scheme.
“This price difference has allowed a segment of consumers, who previously could afford only motorcycles, to consider purchasing automobiles instead, particularly the eco-car. Meanwhile, the tax rebate has made the cost of purchasing a brand new car to drop to the same level as a used car. This has caused many people to turn away from used cars.”
Because of the sizeable rebate, first car purchasers must make a purchase within this year as the program expires by year-end. Some of these buyers may not be financially ready to acquire obligations for their purchase. “This group of people, especially first-time jobbers, may encounter financial difficulties in the future,” Suparat added.
Meanwhile, auto manufacturers have raised their production capacity to meet an increased demand from both the domestic and export markets, which is expected to further increase to 2.4-2.5 million vehicles (1.4-1.5 million for the domestic market and 800,000-900,000 for the export market) in 2013. A large number of automobiles (200,000 to 300,000) purchased under the program would be produced next year, since the present capacity is unable to respond to all the demand.
“The government’s financial and credit measures are also expected to help the public maintain financial liquidity,” Suparat said. “The government’s economic stimulus, which is injecting huge amounts of cash into the system, is expected to help boost auto sales growth further in 2013, especially for pick-ups and eco-cars,” he added.
The production target for 2012 has been raised to 2.2-2.3 million vehicles. During the first seven months of this year, production grew by more than 36% to 1.27 million vehicles. Vehicles sales reached 738,169 units sold during the same period. Of these, the biggest sellers were Toyota, leading with 289,705, followed by Isuzu with 114,024 and Honda with 68,817. Auto makers are also introducing new models into the market, and in some cases are speeding up production to meet the unexpected demand.
However, auto exports are facing difficulties. Many countries are starting to feel the effects of the European financial crisis, although orders are still flowing in, especially from the ASEAN region, the Middle East, Australia, Africa and South America. FTI is confident that the positive factors will enable Thailand to become one of the world’s Top 10 auto producers in the near future, with a production capacity of 2.7 million vehicles per year. (September 10, 2012)