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Buying a new car in Thailand is expensive. Many expats would agree with that statement and are surprised by the cost. When you compare similar car makes and models with the European or American car market, it does seem like we’re paying over the odds. Cars in Thailand basically fall into two categories; domestically produced cars and imported cars. As you may have read, Thailand is considered the Detroit of Southeast Asia and domestically manufactures around a million cars a year from brands such as Toyota, Honda, Ford, Chevrolet and several others
Comparing the base-model, domestically-produced Ford Focus with a similar model in the UK and there’s very little difference in price – are both around B760,000 baht. The same can be said for the new Toyota Prius – B1.2 million. Admittedly the specifications for models produced in Thailand are usually lower than those from other regions (fewer airbags and less electronic extras, for example), but the difference in pricing is not absurd.
When comparing imported cars however, this is where we see our original statement start to bear truth. For example, the new Mini Cooper costs around B800,000 baht in the UK and a whopping B2.2 million for the same model in Thailand. It’s a similar story with the new BMW X5: B2.4 million baht in the UK and B6 million in Thailand. So why such a difference?
The answer is import duties and taxes. In order to protect the domestic auto industry, the government has levied high import duty and taxes on all imported cars. Thailand’s not alone with this approach: Malaysia, Singapore, India and China all impose similar excise duties on imported vehicles, some to an even greater extent.
Importing a new car to Thailand will currently cost between 187 and 328 per cent in import taxes depending upon the engine size and power. Cars with engines larger than 3,000cc or that produce more than 220 horsepower are taxed the most while engines smaller than 2,000cc and producing less than 220 horsepower are taxed the least.
Despite these very high taxes, there’s still a demand for imported cars and it has become standard practice for some manufacturers to break down their vehicles and import them in parts to be re-assembled in Thailand by a local workforce. This is known in the industry as CKD – Completely Knocked Down. The alternative is CBU – Completely Built Up – meaning the vehicle is imported fully assembled, ready to drive once it reaches Thailand.
A CKD vehicle is imported as a knock-down kit which relies on a local assembly plant. This creates local jobs and encourages foreign auto manufacturers to build plants in Thailand. When compared with importing a fully assembled (CBU) vehicle, CKD vehicles are taxed 30 per cent less.
To receive even more tax preferences, some manufacturers use local parts such as Thai-made tyres, windows and headlights.
Going back to the BMW X5 we compared earlier and looking at the price of the same model imported in parts and assembled at BMW’s plant in Thailand, for a CKD model, the price is B4.6M and imported fully assembled (CBU), the price is B6M – a saving of around 23 per cent. So if the allure of a luxury imported car is enough to justify the price, there are some ways to soften the financial outlay.
The high taxation on imported cars in Thailand is not going to change anytime soon. However with the increasing investment into Thailand’s domestic auto industry and in-turn the increased diversity of the brands, makes and models on offer locally, Thailand really isn’t a bad place for buying a new car.