Tax hikes put grey market in doldrums

The grey market for cars is expected to stay flat this year as importers face higher import taxes and a refusal by European car makers to provide after-sales service.

Grey vehicles are new or used vehicles and motorcycles legally imported from another country through channels other than the maker's official distribution system.

An estimated 7,000 cars are expected to be imported in the grey market this year, unchanged from a year earlier, said Sureeporn Udompolpanich, chief executive of TSL Auto Corporation, the luxury car importer.

"There are not yet any vital factors to drive sales this year," she said.

"However, the stronger baht against the US dollar and yen may be the positive factor that allows independent car importers to operate at a cheaper cost."

Ms Sureeporn said the grey market may shift to import more Japanese cars after Toyota and Nissan launched new luxury models.

The Customs Department raised import taxes and tightened customs surveillance last year following complaints by authorised dealers that their market share was being severely eroded by grey-market importers, many of whom were suspected of illegally underdeclaring the value of their imports in order to minimise their tax burden.

Grey-market dealers are able to undercut authorised dealers due to lower customs taxes and lower operating expenses.

The department's measures include new reference prices that make the prices of imported luxury cars higher by 10-20%.

According to the new reference price evaluation, if the price declared by an importer is too low, customs officials will calculate the tax based on its reference price, which includes cost, insurance and freight.

Ms Sureeporn said unfavourable market conditions had prompted TSL to cut its marketing expenses by more than half and shelve its showroom expansion plan this year.

"It's time to reorganise our inside operation, use less energy and save materials at our four showrooms and service centres," she said.

The company has three branches in Bangkok and another in Phuket.

Ms Sureeporn said TSL is looking to introduce one more site in Bangkok in the second half of this year.

The company is also due to open a new showroom and service centre in Myanmar next month after teaming up with Myanmar-based partners.

Ms Sureeporn expects the Myanmar centre to break even six months after its launch, saying the market there has high potential.

TSL is the authorised distributor for Lumma Design and Vath tuning products.

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Writer: Piyachart Maikaew