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Thread: Unintended consequence of subsidies..

  1. #1
    Super Moderator LivinLOS's Avatar
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    Unintended consequence of subsidies..

    OK so last year the Thai government set up a program where people who had never owned a car before, could buy one for the first time and get 100k cash back.. There was a bunch of conditions, the hardest one was the car could not be sold for 5 years (I still dont know what happens when they default on the payments after getting the 100k tho)..

    Loads of people rushed out and bought cars they couldnt afford.. Assuming I guess to get the 100k, get a free years motoring.. Etc etc.. I know of at least 5 cases where people bought cars they had no sensible right to buy (one a tiny woman buying a 4x4 top line pickup when she could barely drive) and losing the car / deposit / any payments made.. I also know a couple of stories of people jumping into the program based on sales mans promises and failing to qualify for the 100k after they bought it, or realizing they couldnt keep it, giving up on the subsidy and selling at a loss once waking up to the payments) Basically it did help out some buyers, and it lead to a rush of car sales, but it also encouraged a debt load many couldnt keep up (or didnt think through) and consumption that you can argue if it was smart or not.

    But what it also has done, is make a strong change to the second hand values of mid range cars.. Putting so many cars onto the roads, has lead to many more on the market and a real movement in pricing.. For the past year or two I have been thinking about a pickup for my bikes.. But as I have a perfectly useable car, and a trailer and bike rack, its just been random look through taladrod etc.. We all know how Thai car values have held up over years.. People expecting to sell a 5 or 8 year old vehicle with a 200k discount from new, well thats changed big time. Only a year ago you were lucky to see any (top end 4x4 full option G interior spec) vigo under 500.. A mate listed one at 450 and under priced it and was swamped with offers and buyers trying to outbid each other over the asking. Now theres loads of them asking mid / low 400s and I recently saw one with an asking price of 380 for a classified / private listing.

    Looking at the auction sites closing prices the shift of the values of the later models also has shifted down a long way, and theres a bundle of them being put out there by the finance companies TISCO etc. I have been vaguely monitoring the decent pickup models, the VIGOs, the Tritons, (and new Ranger but still too new) etc and theres been a solid change in those.. I havent been paying as much attention to the saloons and small cars resale as much, so not so sure but it would seem if its happening in one segment its likely in another.

    The low end is holding up, the compression hasnt pushed down there as much, and of course you still have the sellers with hopeful / dream time pricing especially on the private sales sites, but its easy to see which ones move and which ones sit not getting sold.

    So on the one hand you have a subsidy that helped a few people, claim a 100k after jumping through a bunch of hoops.. But on the other hand they have knocked maybe as much as a 100k off the asset value of everybodys car on the road. When you think about the amount of people that it helped, v the amount of people that it has hurt, and also that the 100k kickback has had to come from tax revenue somewhere (was it a tax reduction or an actual subsidy ??) its hard to see where the winners are in this scheme ?? Maybe the Thai auto industry who got to punt on a bunch of flood repaired cars out of Leam Chabang ??

    Either way.. Good time to be looking for a truck.

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    IIRC it was a tax rebate.

    It certainly put further pressure on the roads to, from and in Patong.
    There were so many new cars here they ran out of red number plates and many were driving with nothing displayed.
    Last edited by Evilbaz; 29th October 2013 at 08:56.

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by Evilbaz View Post
    IIRC it was a tax rebate.
    I also thought so, that it was a reduction in the domestic tax..

    But then I thought, with those eco cars coming in at under 400k, and you still got 100k off, was there that much tax in the car price ??

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    Wasn't it pro rata up to 100K rebate?

    EDIT:

    Thailand's First-Car Tax Rebate Exempt From Personal Tax

    by Mary Swire, Tax-News.com, Hong Kong

    07 June 2012

    Thailand’s government has confirmed that consumers, who have been eligible to take advantage of the first-time car buyer scheme, will now be exempted from paying personal income tax on the purchase tax rebate.
    The scheme was established for first-time car buyers purchasing cars which have been manufactured in Thailand. The cars must have an engine size no greater than 1,500cc and a price not exceeding THB1m (USD31,660). Purchasers have to retain ownership of the vehicles for at least five years.
    The maximum purchase tax refund per vehicle is THB100,000, for cars purchased between September 16, 2011 and December 31, 2012, and deputy government spokesperson Pakdihan Himathongkham has confirmed that the government has resolved to agree with a proposal to exclude that purchase tax refund from this year’s personal tax calculation.

    Pakdihan stated that the government’s resolution reinforces its original intention to boost the automotive industry while raising people’s standard of living by enhancing domestic purchasing power.
    .





    Last edited by Evilbaz; 29th October 2013 at 09:52.

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by Evilbaz View Post
    Wasn't it pro rata up to 100K rebate?
    Unsure.. We looked at a nissan march (horrid) and that was an eco car and the sales person said it got 100k back.

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    Here you go LiL - the salesman lied 555!

    The Nation Oct 2, 2012

    For example, 70 per cent of Toyota Vios buyers and 60 per cent of Mazda2 buyers have applied for excise-tax rebates up to the limit of Bt100,000 per car.

    Eco-car buyers are also participating even though their rebates are lower because of the lower excise-tax rate on this type of vehicle. For example, Honda Brio buyers would get back slightly more than Bt70,000.

    Eco-friendly vehicles such as the Honda Jazz Hybrid, which enjoys a low 10-per cent excise rate, also qualify, with a rebate of about Bt50,000 on offer.

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    K2
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    Another factor affecting old car prices was the phasing out of Gasoline 95 (benzene) - good to see the price drops though and when personal credit bubble does burst it will be a good time to go vehicle hunting.
    Its My Life .....!

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by K2 View Post
    Another factor affecting old car prices was the phasing out of Gasoline 95 (benzene) - good to see the price drops though and when personal credit bubble does burst it will be a good time to go vehicle hunting.
    Gasoline 95 is back in lots of places now.. but benzene 91 has vanished totally I think..

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    Senior Member slampay's Avatar
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    The pre-owned market will eventually increase in price as the "sub-prime" banks will step in to finance the people that defaulted on their new car loans. Those "special finance" loans are very lucrative to both the bank, and the dealer.
    An all cash buyer will always be able to find a steal. Timing is everything.
    People have to drive, and banks need to lend money. And the wheels on the bus go round and round...

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    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by slampay View Post
    The pre-owned market will eventually increase in price as the "sub-prime" banks will step in to finance the people that defaulted on their new car loans. Those "special finance" loans are very lucrative to both the bank, and the dealer.
    An all cash buyer will always be able to find a steal. Timing is everything.
    People have to drive, and banks need to lend money. And the wheels on the bus go round and round...
    The finance market is different here tho.. Finance on used vehicles is at terrible rates compared to new (hence why Thais always buy new) and the attitudes to new stuff, in part from face, also in part from poor servicing and maintenance would probably be different.

    I do wonder tho if the glut of vehicles from that program, will depress the market only for the period that works through the system and recover again, or if the downward movement its made will stay in the market due to the sheer volume of vehicles now, which wasnt the case 10 years ago.

    I mean something had to happen.. 9 grand USD anyone ?? ͢öҹ Ǵ.ʹ

  12. #12
    Senior Member slampay's Avatar
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    Quote Originally Posted by LivinLOS View Post
    The finance market is different here tho.. Finance on used vehicles is at terrible rates compared to new (hence why Thais always buy new) and the attitudes to new stuff, in part from face, also in part from poor servicing and maintenance would probably be different.

    I do wonder tho if the glut of vehicles from that program, will depress the market only for the period that works through the system and recover again, or if the downward movement its made will stay in the market due to the sheer volume of vehicles now, which wasnt the case 10 years ago.

    I mean something had to happen.. 9 grand USD anyone ?? ͢öҹ Ǵ.ʹ
    The big winners would be the manufactures. Expect cash rebates to follow in that case..
    It's like heroin, that was just the start.

  13. #13
    K2
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    Quote Originally Posted by LivinLOS View Post
    I mean something had to happen.. 9 grand USD anyone ?? ͢öҹ Ǵ.ʹ
    Alfie's the one into old bangers! 555
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