The Automotive Industry Club (AIC), part of the Federation of Thai Industries, estimated that around 300,000 people could lose their jobs if the government does not help the sector.
The AIC said it expects the country’s car production to drop from 2 million units in 2019 to 1 million this year. Thailand is the 11th largest car producer in the world.
The main reason for the decrease in production is the outbreak of the coronavirus which has severely dampened both domestic and external demands.
“If half of the production is gone up to 300,000 people could lose their jobs,” Chairman of the Automotive Industry Club Ong-Arj Pongkijworasin told Thai Enquirer.
The FTI said last week that domestic car sales have dropped by 65 per cent in April while the production level is now at 30 year low.
The Thai automobile industry currently employs around 850,000 people and contributes roughly 10 per cent of the country’s GDP.
“The situation is really bad right now and what we told the government is that if half of the production is gone, about 5 per cent of the GDP will disappear along with it and that is a big issue,” Ong-Arj said.
Three measures
Ong-Arj Pongkijworasin said the AIC has already proposed three measures they believe would help increase domestic demand this year.
These measures include the temporary reduction of excise tax on domestically produced cars by 50 per cent from now on until the end of 2020.
Right now, passenger cars with CO2 emissions of 150 grammes per kilometre or less are subject to 30 per cent excise tax in Thailand. The rate for cars with emissions of 150-200g/km are at 35 per cent and 40 per cent for more than 200g/km.
The second measure is for the government to provide an incentive for people to turn in their old cars, aged more 20 years old or above, for a new one in order to receive a discount of 100,000 baht.
This is similar to the first-car-buyer tax rebate program that was introduced during the flooding crisis in 2011.
“These measures should help increase demand from the group of people that can still afford to buy cars rights now,” Ong-Arj said.
He said the move should allow cars makers, part producers, dealers, maintenance centres, and finance players within the industry to keep on employing people.
This also includes jobs within related industries within the supply chain.
“These measures could increase demand from 500,000 units to around 700,000 units and should allow the entire industry to keep on hiring,” he said.
When asked if some car makers will permanently shut down its operation in Thailand if the situation does not improve, Ong-Arj said, “we have not reached that stage yet”.
“If they decided to move out, they will never come back,” he said. “So far none of them have stated that they will move out.”
Ong-Arj said predicting the future is futile as the ramifications of the pandemic are still not fully known.
However, worldwide demand has dropped which will eventually lead to oversupply. This will force carmakers to assess where to cut production.
The third measure that Ong-Arj proposed is the postponement of the implementation of the Euro 5 emissions standard from 2021 to 2024.
The current Euro 4 standard was announced in Thailand in 2012, seven years after it was put in place in the Eurozone.
“The move will help both domestic sales and exports as it would help reduce the production cost,” Ong-Arj said.
He explained that investment to shift from Euro 4 to Euro 5 would cost carmakers at least 10-12 billion baht to comply. The investment cost will then reflect on car prices and in the end, the consumers be the ones to take on the burden.
Government response
Patchara Anantasilpa, director-general of the Excise Department said on Monday that his department already received the proposals from the FTI’s automotive club.
He said the department is willing to help but the lowering of the excise tax on cars “is not suitable.”
He said this is because the taxes for the cars that have been produced have already been collected
“The department already collected taxes from cars that have been produced so there is not much we can do in terms of taxes,’ he said.
