EV price war disrupting used car market

The current situation in the automotive market is akin to the industry undergoing a structural transformation, according to Suvit Chobpradu, vice president of the Used Car Dealers Association. “The shift is from a market dominated by internal combustion engines (ICE) to a rapidly growing role for electric vehicles (EVs),” he pointed out.

“These changes inevitably result in casualties, affecting various parties in the supply chain. And the main reason is the continuous and intense price war of EVs.”

Suvit identified the impact on the used car market as rapid and turbulent price drops. Typically, a new car's value decreases by 5-10% per year once owned. However, severe price cuts for EVs, such as a recent maximum reduction of 160,000 baht (about 30%), have disrupted this norm.

“Normally, Japanese cars are updated every 4-5 years and European cars every 4-6 years. When a new model is released, the old model’s price drops, which is standard. However, with EVs, prices drop within a few months of launch. Some new customers even pay less than those who pre-ordered but haven’t received their cars yet.”

Suvit pointed out that while lower prices are beneficial for consumers, the market experiences a shock when EV prices drop significantly. Consumers then expect both EV and ICE vehicles to reduce their prices, leading to delayed car purchases. This is one of the main reasons the automotive market is currently experiencing severe declines.

Suvit noted that the overall used car business, affected by the price war and the influx of repossessed cars, has seen significant price drops. Even popular models like the Toyota Camry Hybrid, originally priced at about 1.8 million baht, had seen a drop in price to 600,000-700,000 baht although it had since recovered to around 900,000 baht. This improvement is partly due to market adjustment and reduced second-hand car stock.
However, the market continues to be affected by strict financing conditions, as 80-90% of used car buyers purchase on instalment plans.

The EV pricing strategy has also pulled new car prices into the fray, causing financial institutions to worry about the stability of second-hand car prices, leading to tighter lending conditions.

In response, businesses must adapt by speeding up inventory turnover, reducing stockholding periods from three months to one month, or even selling cars within days of acquisition, often without significant refurbishments. At the same time, building consumer confidence through guarantees similar to new cars or providing certifications for accident-free vehicles is essential.

“This situation affects the ability to trade in or purchase new cars, as customers looking to trade in vehicles face a loss. For example, a customer with an outstanding car loan of 400,000 baht might find their car now valued at only 350,000 baht, leaving them short by 50,000 baht to pay off the loan and forcing them to postpone new purchases,” he said.

The situation is expected to worsen this year and next, with an anticipated increase in supply from new EV models or brands entering the market, including some initiating production in Thailand under urgent EV promotion measures or EV 3.0.

Overall, the price war is a significant driver of industry changes, but if the war subsides, the situation will improve, he said,

“Nonetheless, the ongoing changes could be beneficial in the long run. The question is whether we will survive to see that day,” Suvit concluded.