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End of lockup for subsidised Thai cars fuels hope of sales boost

[BANGKOK] After years of falling domestic sales, Thailand's auto industry is hoping 2017 will be a year of recovery with the end of a five-year restriction on people selling cars bought under a government subsidy scheme.

About 1.1 million vehicles were bought under the first-time buyer scheme introduced in September 2011 by then-Prime Minister Yingluck Shinawatra. Sales jumped 81 per cent to a record 1.44 million cars in 2012, the year the subsidy ended.

While that was a welcome boost for an industry badly dented by massive flooding in late 2011, its ban on people transferring ownership for five years depressed demand. Car sales have fallen each year since 2012.

"We expect up to 20 per cent of those car buyers to replace their cars once the lock-in period ends," Tanit Petra, managing director of Mazda Petra, a major dealer for the Japanese carmaker.

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Domestic sales are projected at 800,000 cars in 2017, up from this year's forecast 750,000 units, said Surapong Paisitpattanapong, spokesman of the auto sector division of the Federation of Thai Industries.

"Sales next year should get a boost from first-time car buyers, by 30,000 cars," he said.

But the one-year mourning period for King Bhumibol Adulyadej, who died on Oct 13, and record household debt mean the recovery may not be as strong as many had hoped.

"There is demand from first-time car buyers. But with the mourning, people are not in the mood to buy now," said Mr Tanit.

Thailand is a regional production base for global carmakers. The auto industry accounts for about 10 per cent of Thai GDP and employs 10 per cent of workers in manufacturing.

A pick-up in domestic demand would help counter softer car exports. After hitting a record 1.2 million cars in 2015, exports are expected to miss this year's 1.22 million target due to tepid global demand and stronger competition, Mr Surapong said.

Dhammatouch Thongaram of TMB Analytics said 5-10 per cent of first car buyers should seek new vehicles, "but that will depend on their income and the economy, too".

The Bank of Thailand predicts GDP growth of 3.2 per cent this year and next, up from 2.8 per cent last year. High household debt is one reason why it has not cut rates since April 2015.

Consumer debt levels should fall as households repay car loans, Don Nakornthab, a central bank senior director, told Reuters.

"That should be good for consumption," he said.