Thailand’s first-car buyer incentive scheme a failure

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bangkok_auto_show
Lured by too many incentives?

The so-called first-car buyer scheme in Thailand, an incentive introduced in 2012 by the populist government, turned out to be a huge failure.

Under the scheme, especially low-income earners have been encouraged to buy or reserve a car and benefit from generous tax bonuses. For a mid-size car, tax refunds could amount to up to 100,000 baht ($3,250).

However, the automotive industry chapter of the Federation of Thai Industries said on August 2 that it expects that some 200,000 orders for new cars are going to be cancelled because people who registered and paid a deposit for delivery discovered that they cannot afford the car because they do not get a bank loan or simply don’t have the savings. The chapter also generally cited the slowdown in the Thai economy and diminishing consumer purchasing power as reasons for the cancellations.

This means that out of 1,25 million new cars registered for the scheme, 16 per cent will not be delivered and customers will ask to get their deposit back.

The government initially has reserved an amount of 90 billion baht, or $2.9 billion, to cover the tax refund claims from the car buyers. This number has now been revised to 70 billion baht.

The populist scheme was originally meant as both an incentive for people to switch from motorbikes to cars and a measure to boost car sales in Thailand. Side effects, though, were that a number of people who overstretched their finances had to keep the new car unused because they couldn’t afford gasoline. Another effect was a much denser traffic congestion in larger cities, especially in Bangkok, from the 1.04 million new cars already delivered under the scheme.

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Reading Time: 1 minute

Lured by too many incentives?

The so-called first-car buyer scheme in Thailand, an incentive introduced in 2012 by the populist government, turned out to be a huge failure.

Reading Time: 1 minute

bangkok_auto_show
Lured by too many incentives?

The so-called first-car buyer scheme in Thailand, an incentive introduced in 2012 by the populist government, turned out to be a huge failure.

Under the scheme, especially low-income earners have been encouraged to buy or reserve a car and benefit from generous tax bonuses. For a mid-size car, tax refunds could amount to up to 100,000 baht ($3,250).

However, the automotive industry chapter of the Federation of Thai Industries said on August 2 that it expects that some 200,000 orders for new cars are going to be cancelled because people who registered and paid a deposit for delivery discovered that they cannot afford the car because they do not get a bank loan or simply don’t have the savings. The chapter also generally cited the slowdown in the Thai economy and diminishing consumer purchasing power as reasons for the cancellations.

This means that out of 1,25 million new cars registered for the scheme, 16 per cent will not be delivered and customers will ask to get their deposit back.

The government initially has reserved an amount of 90 billion baht, or $2.9 billion, to cover the tax refund claims from the car buyers. This number has now been revised to 70 billion baht.

The populist scheme was originally meant as both an incentive for people to switch from motorbikes to cars and a measure to boost car sales in Thailand. Side effects, though, were that a number of people who overstretched their finances had to keep the new car unused because they couldn’t afford gasoline. Another effect was a much denser traffic congestion in larger cities, especially in Bangkok, from the 1.04 million new cars already delivered under the scheme.

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