Concerns over EV loans

Concerns over EV loans

NCB perturbed by quality, depreciation

Visitors to last year's Motor Expo examine an EV. The Thailand International Motor Expo 2023 is being held at Impact Muang Thong Thani and continues through Dec 11.
Visitors to last year's Motor Expo examine an EV. The Thailand International Motor Expo 2023 is being held at Impact Muang Thong Thani and continues through Dec 11.

The National Credit Bureau (NCB) is expressing concern over the quality of electric vehicle (EV) loans, noting that the value of an EV depreciates faster than the value of a conventional internal combustion engine (ICE)-powered car.

Competition and marketing campaigns in the EV segment are intensifying, especially among the Chinese brands, resulting in an increase in the number of loans extended to purchasers.

However, the higher rates of depreciation and value among used EVs compared with the rates for used ICE models has created a higher level of risk for auto loan service providers. The NCB will therefore closely monitor the asset quality of loans granted for the purchase on an EV from now on, said NCB chief executive Surapol Opasatien.

"In the case of an accident involving an EV battery, the car's value would drop significantly. The value of used EVs, particularly those that are five years old or older, deteriorates more quickly than ICEs," he said.

There are several captive EV leasing companies that have expressed an interest in applying for membership of the NCB. Some of them are in the process of preparing the required documents and are expected to submit their applications next year.

That would allow the NCB to collect the credit records of EV loans and monitor the country's overall household debt situation better, noted Mr Surapol.

At present, Thailand's household debt stands at roughly 16 trillion baht, representing 90.7% of the country's GDP. Special mention (SM) auto loans, defined as loans overdue by 30 to 90 days, have continued to increase since the beginning of 2023.

In the third quarter, SM auto loans amounted to 213 billion baht, up 17.5% year-on-year. SM auto loans represented the largest proportion of total SM loans, which stood at roughly 493 billion baht, according to the NCB.

However, the migration rate of auto SM loans, which could become non-performing loans, stands at 12%. The migration rates for housing loans, personal loans, and credit cards stand at 22%, 54%, and 57%, respectively.

Total auto loans outstanding among NCB members stood at 2.61 trillion baht in the third quarter, up 2% from the corresponding period last year. The marginal growth rate was attributed to slower new car sales this year, Mr Surapol said.

Car production in Thailand dropped 7.02% year-on-year to 158,734 units in October due to weak domestic sales, according to the Federation of Thai Industries. The figure was also down 8.45% in September.

Nonetheless, EV sales in Thailand showed strong growth for the first nine months. EV registrations in Thailand stood at 50,347 units during January-September, representing roughly 10% of total car registrations of 500,942 units. In 2022, EV registrations totalled 9,729 units, up from 1,935 units in 2021.

Under the government's EV development roadmap for the period 2021-2035, Thailand aims to become a regional hub for EV production, with EV sales expected to reach 65,000 units this year.

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