Thailand getting worried about soaring car loans on quickly depreciating EVs

Over in Thailand, the country’s National Credit Bureau (NCB) has expressed worry about the quality of loans for electric vehicles compared to traditional internal combustion engine cars due to the noticeably faster depreciation of EVs.

With heightened competition and marketing, especially among Chinese EV brands, there's been a surge in loans granted. However, the quicker depreciation of used EVs compared to used ICE models poses a greater risk for loan providers.

The Thailand NCB, according to Bangkok Post, plans to engage in heavier scrutiny of EV loan asset quality moving forward, as stated by NCB CEO 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.

Several captive EV leasing companies aim to join the NCB in 2024 and are in the process of submitting necessary documents, which would enable better monitoring of EV loan credit records and Thailand's household debt.

Thailand's household debt accounts for around 90.7% of the GDP, approximately 16 trillion baht. Overdue auto loans (30 to 90 days) have notably increased since the start of 2023, with Special Mention (SM) auto loans totalling about 213 billion baht in the third quarter, forming the largest portion of total SM loans, roughly 493 billion baht.

The migration rate of potential non-performing auto loans stands at 12%, comparatively lower than housing, personal, and credit card loans. Despite a 2% increase in outstanding auto loans among NCB members, the growth rate is slower due to reduced new car sales this year, attributed by Mr. Surapol to a 7.02% drop in Thai car production in October and weaker domestic sales.

Despite this overall downturn, Thailand witnessed substantial EV sales growth in the first nine months of 2023, soaring from 1,935 units in 2021 to 9,729 units in 2022 and reached 50,347 units in 2023 and constituting around 10% of total car registrations (500,942 units between January and September).

Aligned with the government's 2021-2035 EV development roadmap, Thailand aims to be a regional EV production hub, eyeing sales of 65,000 units by December 31st.