Summit Auto Body Readies for Automotive Industry Growth with Plans of Expansion in a Drive to Increase the Country’s GDP
The New Government First Car Policy Should Create Demands in the Auto Industries, However SAB Remains Unaffected
The Dynamic Industry Newspaper had the privileges of interviewing the Assistant Manager of Summit Auto Body (SAB), Chanwit Boonying, on the first-time car buyer incentives and the country’s developmental preparations in the face of AEC in 2015. The new policy from the current government aiming to assist Thais with tax incentives for first-time car buyers should drive up demands from the supported segments. The policy extends to smaller city and eco cars with engine range of no more than 1,500 cc. The refunds are expected to be implemented by 1st October 2011 onward. We, at SAB, will not be directly affected by the implementations of the first-time car buyer’s policy because our markets are vehicles with higher engine capacity and the fact that more than 95 percent of our products are exported to foreign markets.
Although, there have been voices of concerns surrounding the controversy since the tax incentive was expected to cause a frenzy in the automobile market, and could force more Thai people into debts. Traffic congestion could also worsen, considering the Government’s target to boost car sales by 500,000 units with the help of the policy. Moreover, impacts on the fuel prices, alternative energy supplies and the second-hand car market will be inevitable. With a budget of 30 billion THB set aside for the first-car tax cut policy, some advocates have noted that the amount would be more beneficial if invested in the improvement of the double track railway system and the promotion of public transportation usage and energy saving.
Assistant Manager, Chanwit Boonying, added, the only disadvantage Thailand is suffering from right now is the lack of workforce, both skilled and unskilled. Before we enter the world stage and open our doors to the world, the Department of Labour and other corresponding agencies should join efforts in training and educating the Thai workforce. Thailand needs to grow from within in face of the AEC in 2015.
Summit Auto Body Industry Co., Ltd. is a 100% Thai- owned company and also a major supplier of auto parts maker for the automobile industry. The organization is proud to be one of the most competitive companies in Thailand, able to compete against multi-national competitors. In 1972, Summit Group was established by Mr. Sunsurn Jurangkool under the name of Summit Auto Seat Industry Co., Ltd. Its main expertise was manufacturing seats for motorcycles and interior automotive parts. Sunsurn had envisioned the rapid development following the growth of Thai economy. Therefore, Summit Auto Body Industry Co., Ltd. or SAB was established in 1986 in order to accommodate the requirements for body parts. SAB is currently a leading body parts manufacturer in Thailand. All of SAB factories are certified TS 16949/2002, the latest standard system for the automobile industry. This minor section of the business has proven to be a driving force of Summit Group throughout the past twenty years. With the ability to produce own’s dies, the extensive experience and the constant development in terms of management and manufacturing, SAB is uniquely positioned over other competitors.
National Census on the Government’s First-car Buyer Program
The Cabinet, during its meeting on September 13, approved guidelines to refund taxes for first-time car buyers. At the same meeting, it approved a central fund of 100 million baht from the 2012 national budget to carry out the program and another fund of 30 billion baht from the 2013 national budget for tax refunds.
Deputy Finance Minister Boonsong Teriyaphirom said the scheme did not represent price intervention or a discriminatory practice, and it was not implemented to create trade barriers against any trading partners. Rather, it focused mostly on buyers, rather than auto-makers.
"It is Thailand's internal measure to encourage people to have their own car. The policy is clearly focused on buyers," he said.
Commerce Ministry officials warned that Thailand could be at risk of flouting its obligations under the Asean Trade in Goods Agreement because tax rebates for first-time car buyers would create discrimination against trading partners within the Asean Free Trade Area.
Another senior official source at the Commerce Ministry said as well as Thailand being committed to allowing fair trade of goods among Asean member states, the first-car buyer scheme could breach the World Trade Organisation's rules against discrimination under the GATT Agreement.
Excise Department director-general Pongpanu Svetarundra said the policy had not broken the WTO agreement as tax rates had not been changed.
However, the Finance Ministry will meet car-leasing companies today to consider the details of the scheme.
The government's scheme will give tax rebates of up to Bt100,000 to first-time auto buyers from September 16 to December 31, 2012. The rebates will be paid by the Excise Department after the buyer has owned the car for one year. Payment is subject to obligatory ownership of the car for five years.
Eligible vehicles include passenger cars with an engine capacity of no more than 1,500cc and pickups costing Bt1 million or less. The vehicles must be locally assembled.
Finance Ministry officials pointed out that countries may introduce special incentives to achieve their own goals. They cited China's stimulus package in 2008, when it introduced a discount for trading-in old cars for new ones, along with tax breaks on fuel-efficient cars with engines of 1,600cc or smaller, conditional upon the cars being made in China. The country's car sales saw more than 40-per-cent growth in 2009 to more than 11 million units.
A partner in the law firm Baker and McKenzie, Wynn Pakdeejit, said Thailand had a right to enact privileges for Thai people based on public benefits. Since Thailand does not have a bilateral investment treaty with Malaysia, the first-car scheme does not discriminate against Malaysia.
The first-time car buyer program was in response to the Government’s policy of raising the people’s standard of living by enhancing domestic purchasing power and creating balance and strength with quality in the macroeconomic system. In this way, the Government has pledged to introduce tax measures to reduce the general public’s burden of purchasing such essentials as the first house and car.
The Ministry of Finance stated that the first-car buyer program would enable at least 500,000 low-income earners to have the opportunity to own a car. At the same time, it would enable the Government to earn more from the collection of corporate income tax, value-added tax, and car excise tax.
Thailand stands a good chance of expanding the automotive industry, as several foreign investors, especially the Japanese, have moved their production bases to the country. In 2010, Thailand produced 1.6 million vehicle units, an increase of 60 percent and the highest ever in the history of Thai auto manufacturing. Out of this number, 900,000 units were exported, a 68 percent increase, and 700,000 units were sold domestically, representing a 27 percent increase.
