Air-con sector fighting return of 15% excise

Jintana Sirisantana, vice chairwoman for economic affairs of the FTI’s Air Conditioning and Refrigeration Industry Club, said the industry enjoyed record growth of 30 per cent in the first year of the excise cut.

“Growth was also more than 10 per cent last year and 10-15 per cent is projected for this year,” she said yesterday. “However, the air-conditioner industry will be frozen if the Excise Department reimposes the 15-per-cent excise. And I have no idea whether the industry will survive.” 

The manufacturers will very soon submit their opposition to the plan to the Excise Department of the Finance Ministry, saying that if the department decides to go ahead with the tax, they will have to raise prices by Bt3,000-Bt20,000.

The Bt3,000 increase would be for a small air-conditioners rated at 12,000Btu (British thermal units) and Bt20,000 for a large unit rated at 60,000Btu.

Benja Luicharoen, director-general of the Excise Department, said makers should pay excise taxes because air-conditioners are luxury products and energy-hungry.

Since the excise tax was removed, those makers have not made any price reductions to benefit consumers, he said. However, Jintana said makers had dropped their prices by more than 10 per cent on average since the tax went to zero. 

Sumeth Simakulthorn, founder and chairman of compressor manufacturer Kulthorn Kirby, said local manufacturers of air-conditioners and parts would face more difficulty in running their business if the authorities decided to slap the 15-per-cent excise on them. They are already overburdened with a higher cost of production driven by the surging prices of raw materials, such as copper.

The government’s move to raise the minimum wage to Bt300 on April 1 will also cost the makers heavily, as they are operating in a highly competitive market, he claimed.

“We struggled for almost 17 years before the excise tax was totally removed in late 2009. The government should not freeze the industry by launching such an excise tax, but focus on giving support to Thai manufacturers so that they can stay competitive in the open-trade environment when the Asean Economic Community is fully implemented in 2015,” he said.

The Chinese government, for example, provides an 18-per-cent cash subsidy to local air-conditioner makers that export their products.

Thailand’s air-conditioner output reached about 17 million units last year, of which 1 million were distributed domestically and 16 million shipped abroad. Many international brands such as Mitsubishi, LG, Daikin and Fujitsu as well as 10 local brands use Thailand as their production base.

The air-conditioner business is one with low profit margins – no more than 15 per cent for manufacturers and only 3 per cent for distributors and 5 per cent for traders, Sumeth said.

“Local makers of air-conditioner parts such as compressors are in the process of hiking their prices by 7-10 per cent to cope with the new minimum-wage scheme to be launched by the government at the beginning of next month as well as the higher prices of major raw materials.”