Tax cuts : Thailand says “no” to the car industry

Prime Minister Abhisit Vejjajiva on Wednesday rejected requests by auto industry operators for the government to cut excise taxes by three per cent, but not more than Bt15,000, across all models, individual tax rebates for car buyers and a government guarantee for downpayments on new vehicles. (TNA)

Bravo Abhisit. A courageous (look at the bailout hysteria in the world) and wise decision.

I’m punching Abhisit non-stop since the Frankenstein coup last december, so I’ve got no problem to acknowledge when he’s doing or saying something meaningful. šŸ˜‰

First, Thailand hasn’t the financial means for those tax cuts, anymore. Second, tax cuts are too short term, they solve nothing. It’s a sugarcoating. Third, it’s obvious that after car industry, many other businesses would ask the same. I mean we all can ask for a bailout. Potentially

Last point : if the thai (sorry… the japanese) car industry wants help… they have to cut… their prices ! Then they will increase their sales.

All those morons (in Thailand but everywhere else) refuse deflation. They cry for Big Mama (the nanny state). They are not entrepreneurs. They are weak bureaucrats.

Deflation is not something you can choose, or avoid or refuse… You can merely gain time.

Deflation is a normal and healthy process. It’s a mean to rebalance things that are deeply unbalanced.

Insane assets valuation. Insanes debt amounts The solution : a dirty and violent deflation.

Of course, many people would lose their shirts, their positions during the process. So what ? Society evolves. It’s the creative destruction of Schumpeter.

So dear japanese car makers : reduce your costs, lay off workers, reduce wages of executives, reduce selling prices, cut the rotten branches, increase your R&D, reduce marketing and advertising budget, increase your efficiency, reinvent your business model if the current one is dead, etc…

This is the bitter medecine we have to drink. All of us.

9 Responses to “Tax cuts : Thailand says “no” to the car industry”


  1. 1 Prokster 5 March 2009 at 5:24 am

    TC, why do they have such huge car taxes in Thailand? Obviously it would not be fitting for dirty proles to drive Merc’s, but apart from an elitist ploy, what’s the offical reasoning?

  2. 2 ThaiCrisis 5 March 2009 at 5:37 am

    I think we need to separate imported cars… and cars produced in Thailand.
    On the import side, the reasoning is good I believe : luxury brands are already very expensive… but thai rich people love them, can’t live without them… So to slam huge imports duties makes sense (for the State’s coffers). Plus, the idea was of course to protect… the thai (sorry japanese) car industry.
    šŸ˜‰
    Who is asking for tax cuts right now ? Not Mercedes, not Audi… But local manufacturers.

  3. 3 thaichris 5 March 2009 at 6:14 am

    @Prokster

    The tax management helped Thailand to become a major player in the car parts industrie. 25 years ago the high taxes for imported cars have been put in place in order to force car makers to produce (at least assemple) cars locally. And the created a clever ‘tax expemption schema’. Car makers have been asked to produce car parts in Thailand for export and use in thee factories world wide. And they had to pay lower tax for all car up to the amount they exported parts for. For example: Peugeot set up a factory in Thailand producing mag wheels. Let’s say they produced mag wheels for a total amount of 1 Billion THB. Then they have been allowed to import complete cars produced abroad up to the amount of 1 billion and pay only 30% tax. For the rest of the cars imported that year, they had to pay 300% import tax. That is why you see car parts for various brand produced in Thailand and sent abroad. Manufacturers which don’t have a car part factory in Thailand haven’t been compeditive as they hd to pay 300% import tax for all cars.

    They impossed another clever rule (unintentionally) which made Thailand the largest producer of 1 ton pick-up’s in the world. 25 years ago, pick-up’s have been declared ‘agricultural vehiceles’ and therefor been taxed much lower. ^Then people in Thailand started to buy only pick-up’s because the price difference to a limousine was hugh. But the demand was restricted to Thailand as in other countries (except USA) pick-up havn’t been very popular. Ergo the japanese car makers set up plants to produce 1 ton pick-up’s. Little story about it: 20 years ago a clever automobile trading company imported Benz Combi and only payed little tax (the back of the car looked like a pick-up with a CARRYBOY).

    Overall the tax schema for cars is used by thje government to support/protect local manufaturing.

  4. 4 Prokster 5 March 2009 at 8:28 am

    Many thanks for that. Do you think the local auto industry will come out the other end if the crisis well, or is a contraction in capacity likely? I would have thought at least 2 if not 3 current big playes will have to cut production in either Thailand, Indonesia or somewhere else in ASEAN.

  5. 5 ThaiCrisis 5 March 2009 at 8:40 am

    All of them have already cut their capacities… It the US of course, Europe too, Japan etc.
    You can find some news about Thailand : first they said “we don’t change nothing”.
    And after, it started… end of OT for instance.

    The point is : sales continue to drop, everywhere (even in Thailand, january was bad).
    https://thaicrisis.wordpress.com/2009/02/28/chart-car-market-historic-drop-in-january-back-to-may-2002-level/

    So… what can they do ? Continue to produce cars that won’t be sold ? Continue to pay the same number of workers, doing nothing ? Sure they can. But for how long ?

    Again, we see in this precise case… that the key point is… duration. Duration of the crisis. Right now, all the clowns base all their policies (bailout etc.) with the assumption that the recession is going to end quickly… Gain time, weather the storm… this is the motto of politicians, officials etc.

    But what if… what if the recession continues ? L shape like Roubini wrote ? 10 years like Japan ?

    The US (and Europe) give money to the car industry… to just secure its survival… on a monthly basis. People don’t realize the scale of the problem.

    Basically, tax payers (sorry their grand grand children, because it’s only debt) are giving money to companies, so those companies can continue to pay their workers…. even though they produce something that can’t be sold. Official motto : avoid lay off.

    Perfect on the paper ! It could be a good policy… if the crisis lasts a few months…. But again and again, what if… it lasts much more ?

    The system collapses.

  6. 6 George P Tuckeer 5 March 2009 at 8:45 am

    Unsold cars around the world. To get a visual idea of how bad things are, view the pics:

    http://www.ritholtz.com/blog/2009/02/unsold-cars-around-the-world/

  7. 7 r.bell 17 March 2009 at 9:41 am

    You guys are totally off the mark and poorly read and researched on this issue.
    The facts are autos, domestic, under 2.0 liters. 35% excise
    TRUCKS 7% excise
    One hell of a dumb ass differential. Instead of promoting fuel economy it promotes usage. Instead of a smaller footprint , it forces everyone to buy a truck for value. Cash flow could have been balanced by an even distribution of the excise with no reduction of revenue.
    The bottom line is this. Thailand is one of the most protectionist, self serving governments in the world. It is a closed society with the elite owning and controlling every phase of product.
    I live there.

  8. 8 ThaiCrisis 17 March 2009 at 3:09 pm

    I can only agree with your “bottom line”.

    But my point was not to criticize the whole tax system around the car industry. just the idea that to save a living-dead industry, we need to give free money to people, so they can buy… cars.

    We saw the result of such policy in the US, with GM, Ford etc. At one point those businesses were more financial companies (to finance their own customers) than industrial companies.

    They lost it.

    The car industry has to restructure itself, reinvent itself. A vulgar tax cut won’t be enough : it would be a mere G-string.

  9. 9 OSK 12 May 2009 at 4:19 pm

    Sometimes I think that the tax does have a good reasoning – to stop thai’s from buying high priced imported things. On the the other hand I REALLY REALLY hate the tax system for luxury goods. I mean Im thai but this system should be changed because how do other countries still survive with low import tax? why cant thailand do that also? I mean for cars Thai people dont deserve to be stuck with japanese cars (no offense) because of financial problems. I mean thailand would look much better with cars other than toyotas, hondas, isuzu and the rest of those cars. It just makes thailand look cheap in a way like having the same car for everyone. I certainly believe that if thailand cut down its import tax on cars than there would be a whole load of better cars on the road and more of a range of cars…


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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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