Concerns over non-performing loans (NPLs) in the automotive industry have expanded to the electric vehicle (EV) segment as some buyers may not be able to pay instalments for their EV, amid a rapid sales increase.
This group of buyers is often referred to as "new-generation people" whose financial status is not strong, said Pinyo Tanawatcharaporn, former president of the Association of Used Car.
Their vehicles are likely to be seized if they fail to manage their instalments well amid the economic slowdown and weak purchasing power, he said.
"The association expects to see EV seizures increase in the second half of this year," said Mr Pinyo.
If the seized EVs were sold in the second-hand car market, it's unlikely financial institutions would arrange loan schemes for people wishing to buy a used EV, he said.
"If a customer wants to buy a used EV, they must pay in cash," said Mr Pinyo.
Banks are not confident of granting loans in the second-hand EV market, which is expected to be small as many people still want to buy a new EV, the prices of which have tended to decrease as more car companies have entered the market, leading to a price war.
It is difficult for banks to calculate the price of a second-hand EV as the prices of new EVs continue to change, said Mr Pinyo.
Usually, the prices of used cars are 30-40% lower than the prices of new ones.
In the second-hand car market, internal combustion engine-powered cars remain more popular than EVs, he said.
Last year, banks adopted stricter criteria for the granting of car loans for fear of generating NPLs, which led to a drop in car sales, especially in the pickup segment.
Household debt was estimated at more than 90% of GDP in 2023.
However, sales of EVs are expected to keep growing this year, thanks to the government's EV incentive package.
The EV incentive package, dubbed EV3.5, is expected to play an important role in fuelling the growth of the EV industry.
EV3.5 covers subsidies, reduced import duties for fully assembled cars and an excise tax cut.
Companies participating in this scheme spanning 2024-27 are required to start producing EVs domestically from 2026.