The Excise Department has submitted to the Finance Ministry the pros and cons of shortening the minimum ownership period under the first-time car buyer scheme to three years from five.
Director-general Somchai Pulsawas said the move had the backing of car makers.
The Federation of Thai Industries' automotive industry club and car makers recently urged the Finance Ministry to ease the condition under the scheme that requires buyers to maintain ownership of the vehicle for at least five years.
They believe cutting the ownership period to three years will boost a sluggish car market.
Some 1.24 million people applied for tax rebates totalling 81 billion baht under the Yingluck Shinawatra government's first-time car buyer scheme.
People who applied for the scheme at the Excise Department before the end of 2012 qualified for a rebate of up to 100,000 baht after they had owned their car for a year.
The scheme has been criticised for stealing future sales, creating artificial demand and adding to spiralling household debt, particularly among low-income earners.
Car sales boomed in 2012 and 2013 at 1.45 million and 1.33 million vehicles, respectively, before falling by 33.7% last year to 881,832 after the impact of the scheme wore off.
A Finance Ministry source estimates 600,000 to 700,000 cars would be freed up if the ownership period requirement was cut to three years.
About 10% of these would be sold so the owners could buy new ones.
However, the source urged the Excise Department to consider measures to alleviate the impact on used-car dealers.
The number of used cars for sale would increase significantly and could bring down prices further, the source warned.