The Finance Ministry says it expects its pickup loan guarantee measure to entice 6,250 new pickup purchases this year.
Speaking during the launch of the programme last Friday, Deputy Finance Minister Paopoom Rojanasakul said the measure, which starts on April 1 and runs until Dec 30 of this year, has a loan guarantee budget of 5 billion baht for the first phase and is expected to generate an economic benefit of 21 billion baht.
The scheme should support the domestic auto parts industry, which includes around 2,500 companies, he said.
The automotive industry accounts for 18% of Thai GDP and the country is the world's largest production base for one-tonne pickups. Of the 1.47 million vehicles produced in Thailand, 50% or 730,000 units are one-tonne pickups.
Mr Paopoom said the prolonged economic downturn over the past decade caused domestic car sales to decline. Normally domestic sales account for 50% of total production, split evenly with exports, but last year domestic sales dropped to 31%, he said.
The sluggish economy led leasing companies to assess higher risk for vehicle loan applicants, resulting in a higher rejection rate. In addition, the dip in used vehicle prices made leasing companies more cautious to lend, as they may not recover their cost when reselling repossessed vehicles, said Mr Paopoom.
He said the new programme offers loan guarantees for small and medium-sized enterprises (SMEs), both legal entities and individuals, wanting to buy new pickups for business purposes. This includes farmers transporting agricultural produce, construction contractors, goods transport for trade, and food trucks.
The loan guarantee per vehicle is capped at 1.5 million baht with a guarantee period of up to seven years.
The guarantee fee for the first three years is paid by the Thai Credit Guarantee Corporation (TCG), then in years four to seven, the borrower pays the fee at a rate of 1.5% of the guarantee amount, which is lower than the normal rate of 1.75%.
Mr Paopoom said if the guarantee budget is fully utilised, TCG is ready to add more funds for a second phase.
For the guarantee rate for leasing loans, it starts at 40%. If the borrower is unable to pay the loan instalments and the pickup is repossessed and sold, TCG will subtract the value of the pickup sale from the remaining outstanding loan balance and pay 40% of the remaining amount.
"This measure is to enhance confidence among financial institutions, making them more willing to grant loans and increasing the chances of loan approval for SMEs," he said.
