Thailand’s automotive manufacturers have said that a suggested cut to duties on imports of cars from 80% to 40% threatens the industry’s slow recovery of recent years.

Implementation would put jobs at risk and could disrupt Thailand’s drive to become a regional carmaking centre, according to the Federation of Thai Industries’ (FTI) automotive group, which comprises 50 car manufacturers.

The tariff cut has been proposed to the finance ministry by Thailand’s Independent Car Importer and Distributor Association (ICIDA), whose chairman Somsak Sriratanaprapas was quoted in local media as saying that the duty should be the same as in neighbouring countries to secure a level playing field for local car manufacturers and importers.

The association represents 60 Thai car importing companies, mostly small- and medium-sized enterprises, serving clients who want models which are not generally available in Thailand. Their segment is known as the 'grey market' because they are not authorised dealers.

Somsak said Thailand’s automakers had been well-protected by an unrealistically high duty for more than 30 years and that it was time for a reduction, given the sharp decline in the grey market. A weak Thai economy led to imported car sales falling to around 5,000 units in 2016-2017, down from 12,000 in previous years. A cut in duty could help business to pick up, he said.

The import market may be tiny compared with the number of cars produced in Thailand, but the country’s automakers are suffering a slump of their own following the market contraction of 2014, when a military coup toppled Prime Minister Yingluck Shinawatra.

Domestic production fell by 23.3% from 2.45m the year before to 1.88m vehicles in 2014. Last year it was 1.98m, making the country the Asean region's largest car producer but still well short of pre-coup levels, the Nikkei Asian Review reported.

Thailand’s carmakers are worried that any cut in levies on imported cars could mean a sharp rise in their volumes, eroding demand for new, Thai-made cars and causing harm to the country’s automotive industry, whose 2,500-plus firms contribute over a tenth of Thailand’s GDP of more than $400 billion, said Thavorn Chalassathien, head of the FTI group.

“That would also badly affect more than 850,000 workers employed in the Thai auto and auto parts industries,” the Japanese business newspaper quoted him as saying.

Halving levies on imported cars would disrupt development of the domestic industry and discourage fulfillment of the government’s ambition to nurture the next-generation car industry, according to the FTI.

A Ford spokesperson in Thailand told Automotive Logistics: “We support an automotive policy that is predictable, clear, consistent and applies equally to all stakeholders, and believe that a well-studied reduction of the import duties could provide benefit to consumers.”

Local media reported a finance ministry spokesperson as saying it is talking to the ICIDA about the proposed tariff cuts.