Thailand vehicle sales plummet 24% as debt pressures rise
Thailand’s vehicle market faces a challenging 2024 as initial optimism fades amid weaker-than-expected sales and increasing debt pressures.
Vehicle sales in Thailand declined sharply by 24% year-on-year in the first four months, totalling only 46,738 units, according to the Asean Automotive Federation (Asean Autofed).
This marks a significant drop from the 59,530 units sold during the same period in 2023. Initially, projections had indicated a 6.1% growth in vehicle sales for 2024, following a difficult 2023 where sales fell by 8.7%.
Stricter loan criteria from financial institutions, driven by high household debt levels, have led to a revised forecast of an 18.1% contraction for vehicle sales in 2024.
The National Credit Bureau reported a 15% year-on-year increase in non-performing loans (NPLs) during the first four months of 2024, with defaults on automobile and home loans contributing to this rise, reinforcing the negative outlook for Thailand’s vehicle sales.
Economic growth is another concern, with GDP growth slowing to 1.5% year-on-year in the first quarter, down from 1.7% in the fourth quarter of 2023. Consequently, the country risks team has adjusted Thailand’s full-year growth forecast to 2.8% from the previous 3.0%, reflecting the latest economic conditions.
Looking forward to 2025, the prolonged economic challenges and continued credit restrictions have prompted a further revision in forecasts. Vehicle sales are now expected to contract by 4.2%, taking into account the lasting effects of current financial conditions and the slow recovery of consumer confidence and spending power.
In the commercial vehicle (CV) segment, stricter lending requirements are expected to have a significant impact. The pickup truck segment, which accounted for 41.9% of total vehicle sales in 2023, has seen the highest rate of loan rejections and recorded a 42.2% decrease in the first four months of 2024.
Vehicle sales
Investment in fixed capital goods, especially vehicles, is likely to remain subdued due to weak economic growth. Additionally, delays in government formation following the May 14, 2023 elections have negatively impacted government spending, further affecting the timely disbursement of projects.
The electric vehicle (EV) segment in Thailand is also expected to face challenges due to stricter loan requirements, which are slowing down EV adoption. Reduced incentives, as outlined in the government’s EV Policy 3.5 released in November 2023, have lowered the incentives for EVs with a battery capacity higher than 30 kWh and priced between 2 million baht and 7 million baht (US$55,000 and 193,000) from 150,000 baht to 100,000 baht (US$4,100 to 2,750).
Signs of sluggish EV sales are emerging as dealers struggle with unsold inventory. However, growth in EV sales is still anticipated for 2024, supported by falling prices and increased local production. The forecast for EV sales growth remains at 34.9%.
Despite the overall weak sales outlook for internal combustion engine (ICE) vehicles, Thailand’s EV penetration rate (total EV sales as a percentage of total vehicle sales) is expected to trend higher. The new projection indicates an EV penetration rate of 17.1%, compared to the previous forecast of 14.5%, reported Bangkok Post.
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