Thai Vehicle Tax Rebate Plan Remains Under Attack

The Thailand government’s tax rebate for first-time car buyers is facing a steady stream of criticism by auto makers.

The Thai cabinet will meet Tuesday to consider changes to the plan at a time when Prime Minister Yingluck Shinawatra is being accused of backsliding on, or making significant changes to, key campaign promises.

Ford Thailand wants tax-rebate plan to include Fiesta.

The program, which began Sept. 16 and runs through Dec. 31, 2012, offers tax refunds up to TB100,000 ($3,311) to first-time buyers of new Thai-built vehicles.

The vehicles must have maximum 1.5L engine capacity or be double-cab pickup trucks with unlimited engine capacity and costing no more than TB1 million ($32,352). Buyers must retain ownership of the vehicle for at least five years.

Ford Thailand calls the engine criteria arbitrary and wants the limit raised so its 1.6L Fiesta model is included in the rebate plan.

“We have raised the issue with the government,” Ford Association of Southeast Asia Nations spokesman Neal McCarthy tells the Bangkok Post.

Ford argues tax incentives should not distort fair-market competition. The auto maker says the government should apply the rebates impartially so Thai consumers can make informed purchases.

“The Fiesta beats all 1.5L vehicles in fuel efficiency and low emissions, and it's cheaper,” McCarthy says.

But Honda Automobile Senior Vice President Pitak Pruetisarikorn says his company opposes changing the engine-capacity limit, because only Ford has a 1.6L engine in the compact-car market and its inclusion in the rebate program would benefit only one auto maker.

He says if the government wants to help first-time car buyers, the rebates should apply to all vehicles regardless of the engine’s size.

The Post says most auto makers would prefer to replace the engine-capacity limit with a price cap of TB1 million ($32,352). Pitak says this would help buyers who want cars with more-powerful engines for family use.

Nissan Thailand President Toru Hasegawa agrees the current rebate plan curtails competition.

“The tax rebate for cars is complicated, confusing and questionable,” he tells the newspaper. “Some car makers are happy with the scheme, but others are unhappy. Even some consumers are not satisfied with the tax rebate as well.”

Nissan is critical of the program, even though its March eco-car qualifies for the rebate.

The Japanese auto maker pioneered development of eco-cars, which are subject to a 17% excise-tax rate. Other subcompacts are taxed at 30%, but the rebates for first-time buyers could lower their prices nearly to the level of eco-cars.

Hasegawa says this narrowing of the price gap will discourage purchases of eco-cars, which the previous government aggressively promoted as a product champion after pickup trucks. A number of auto makers are spending billions of baht to build their eco-cars.

Tata Motor Thailand has filed an official complaint with the Indian embassy in Bangkok, saying the rebate scheme is an unfair trade practice that discriminates against imports.

Both Tata’s cab-over pickups and Nano small car are ineligible because they are imported. The Indian auto maker says it may drop plans to import the Nano if it remains excluded.

Proton cars imported from Malaysia also are barred, and that auto maker has filed a complaint with the Malaysian Embassy.

Critics of the rebate program include leasing-and-finance companies that claim it could lead to a high rate of loan defaults. They want to protect themselves against default by having the rebates directly sent to them, instead of to car buyers.

This proposal emerged during a discussion of the program between finance ministry officials and financing and auto executives.

“The meeting was just held to clarify the details of the program, but was not intended for the industries to question the problems related to the program,” an unnamed industry source tells the Post.

The source says businesses support the program in principle but contend some aspects of it are impractical. They also are upset that government officials did not consult them beforehand.

The newspaper says Deputy Finance Minister Boonsong Teriyapirom announced the rebate plan without considering Thailand’s commitments under the World Trade Organization or sufficiently analyzing its actual economic benefits.

“Some economists have questioned why the government was pushing a policy which stands to benefit only a limited group, with only a minor positive impact on economic growth,” the newspaper says.