First-time car-buyer scheme will boost sales, makers say
Carmakers expect high growth in domestic sales when the government implements its programme to support first-time car buyers.
The Cabinet today is to consider the first-time car-buyer scheme proposed by the Finance Ministry.
Under the programme, those who buy a car for the first time, if it is priced lower than Bt1 million, will be given tax refunds of a maximum of Bt100,000. The tax refund will either be a one-time payment in the first year of ownership of the car or three payments over the next three years, depending on the decision of the Cabinet.
Previously, the government said it would support only those who bought eco-cars for the first time, with the support coming in the form of a tax allowance.
Pitak Pruittisarikorn, executive vice president of Honda Automobile (Thailand) Co and director at Asian Honda Motor Co, Honda's Asia and Oceania regional headquarters, said the scheme would benefit the auto industry in general.
"I can't see any negative effects, since more people would be encouraged to purchase new automobiles," he said.
Pitak noted that total auto sales could be higher, but at the same time there could be cannibalisation as first-time buyers avoid upmarket brands as well as trade-offs among models of the same brand.
"For example, since the Civic is priced under Bt1 million and qualifies, some Accord buyers may decide to choose the Civic instead because of the tax refund. And since buyers of the City and Jazz will get a Bt100,000 refund, buyers of the Brio will not, since it is an eco-car and is taxed less than Bt100,000. So buyers may end up choosing the City or Jazz instead, since the savings are higher."
Pitak also agreed that finance companies would have to be more careful with approving loans.
"However, a large number of applications will be sponsored by parents, so the credit problem may not be so much. And the number of years that the vehicle has to be used by the first owner before it can be sold and ownership transferred legally is another issue that will have to be closely followed," he added.
Komkrit Nongsawas, general manager for marketing and corporate communications at Mercedes-Benz Thailand, which does not have models that fit the Bt1-million criterion, said the new policy would benefit auto companies in terms of increased sales.
"Since it will be easier to own a car, the total automobile market will be bigger than forecast," he said.
But there are concerns too.
"The qualifications of buyers will be important, since this is intended for grass-roots people, and finance companies must be very careful with approving loans because of the large number of applications. They must be able to screen applicants carefully, otherwise there could be more bad loans if the vehicles are repossessed," he warned.
"Automobiles are products that are sometimes easy to own but difficult to maintain," he added, noting that the residual value also decreased as it got older, unlike property.
"In the past we saw that the Ban Ua-arthorn scheme was intended for the poor but the projects resulted in many problems," he said.
Toyota Motor Thailand Co, the largest auto producer in the country, declined to comment on the issue. A company spokesman said its executives would rather wait until the bill is passed before making any comments.
"We do not want to cause any disturbance now and will make comments after it has been passed," he said.
