Grey market irks Bentley, asks for lower duties

Bentley Motors Ltd, the British maker of luxury cars, is urging the Thai government to curb the prevalence of grey imports.

"We should create a fair and easy system so we can all operate under the same rules. We get a lot of markets asking us why we can't be cheaper, but it's not us but taxes and duties. We're abiding by the rules, and people are saying we're too expensive," Geoff Dowding, the regional director for Asia, the Middle East and the UK, said during a recent stop in Bangkok.

He said the Southeast Asian market is quite small for Bentley due to high duties of up to 328% on luxury cars, and there are about 2,000 unregistered luxury cars plying Thailand's roads.

"It's quite easy for people to bypass the duties," said Mr Dowding.

Bentley's lone factory in Crewe, England, exports 85% of its output to 60 countries including 30% each to the US and China.

Singapore is Southeast Asia's fastest-growing market now, but Indonesia will probably be the market for the future, said Mr Dowding.

He said starting next year, China should be No.1 for Bentley, pulling ahead of the US, a great leap forward considering it used to account for only 3% of the company's total just five years ago.

Mr Dowding said the world contains some 11 million high-net-worth individuals, defined as those having investible assets of US$1 million or more.

But fewer than 1% spend their money on luxury vehicles, so this is an opportunity for luxury car firms, he said, adding that Asia is a fast-growing market with increasing purchasing power.

Mr Dowding said this year's output will be 9,000 cars, up from 5,000 in 2010 and 7,000 last year.

Thai sales are expected to come in at only 15 cars next year, although that will beat the annual average of 12.

AAS Auto Service is the authorised importer for Bentley cars in Thailand.

However, authorised dealers have seen their market share severely eroded in this country by grey-market importers, many of whom are suspected of illegally underdeclaring the value of their imports to minimise their tax burden.

Grey-market dealers are able to undercut authorised dealers not only by paying lower customs duty but also due to cheaper operating expenses.

For instance, legitimate dealers must invest heavily in both branch showrooms and repair and warranty facilities that meet manufacturers' standards.

Some grey-market importers also bring in used cars but declare them to be new in order to evade the requirement to obtain an import licence from the Commerce Ministry.

The Customs Department said 4,000 to 5,000 cars are imported each year, of which only 100 are considered ultra-luxury cars valued at upwards of 20 million baht each.

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Writer: Nanchanok Wongsamuth
Position: News Reporter