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14 Sep 2017

Industry

New Auto Excise Tax to Induce Investments, Little Effect on Buyers (Current Issue No. 2864 Full Ed.)

 The government has introduced a new method of calculation on the auto excise tax, aimed at bolstering efficiency in auto excise tax collections and ensuring that there is fair competition in the market. Since retail car prices are now used as the base in the new excise tax calculation method, instead of ex-factory prices for domestically-produced cars and CIF prices for completely-built-up automobile imports as before, the base price is thus higher than the previous one.

We at KResearch are of the view that the new excise tax calculation method will have little effect on car buyers within the near term because it does not incur a significant tax burden on the business. This means that domestic auto prices so affected should not increase soon, while current competition in the market is high and consumers have wider choices and are attracted to marketing promotions for some time. Nevertheless, auto importers may face higher tax assessments; therefore, such businesses will need to adjust quickly to remain competitive.

On the government's claim that the new tax calculation method will help promote fairer competition in the market, KResearch is of the view that if that goal is achieved, it will indirectly improve investor confidence and thus induce carmakers to invest more in Thailand, in particular, toward the manufacturing of luxury cars or other automobiles with relatively small market shares at this time, but would otherwise have a promising outlook here, plus electric vehicles (EV) that are now being promoted by the government. EV manufacturers enjoying BOI investment promotion privileges would become even more competitive than rivals.

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