Despite the overwhelming success of the government's first-time car buyer scheme, the Thai Hire Purchase Association is concerned about the quality of eco-car loans.

Chairman Isara Wongrung said market leaders in the auto loan sector have eased conditions for finance, allowing the eco-car segment to expand its market share under the first-car programme.

Down payments of less than 20% of the car price form a key strategy to attract buyers with low ability to meet the down payment and monthly debt repayments.

Mr Isara said the scenario would put pressure on asset quality and bring an increase in non-performing loans (NPLs).

However, the overall quality of auto loans remains normal. The country's positive economic momentum will also strengthen consumers' purchasing power. Economic growth is forecast to be 4-5% this year.

Mr Isara, who is also an executive chairman of Kasikorn Leasing, said his company can control NPLs at 0.8% of total outstanding debts under strong risk management. It requires a minimum down payment rate of 20% for all market segments.

Its eco-car portfolio is about 20,000 units or 10% of its total portfolio.

Thanachart Bank executive vice-president Anuchart Deeprasert said the bank has booked some NPLs for eco-car finance under the government's first-car scheme.

Rising bad debts for the segment are in line with its larger loan portfolio and are an insignificant increase, he said.

Thanachart Bank, the market leader in auto loans, has booked consumer NPLs at lower than 1%, as targeted.

"The first-car programme partly encourages unreal demand for auto loans because the government set a limited period for the tax incentive. However, it's manageable," Mr Anuchart said.

Mercedes-Benz Leasing (Thailand) managing director Supavut Jiramanutnakorn said tough competition in the eco-car market under the first-car scheme would increase bad debts for the next 1-2 years. Eco-car loan applicants generally have the burden of other consumer loans.

"Auto loan providers are playing an aggressive strategy in the market segment despite the risks," he said.

"They expect to earn market share and expand their customer base, but that will mean higher NPLs initially."