Second-hand tsunami: Used car flood drives Thai sellers to despair
A torrent of high-quality used cars flooding the market might sound like a bargain hunter’s dream but it’s turning into a nightmare for sellers. While buyers drive off with the deals, automakers in Thailand are hitting potholes trying to move new stock, and used car dealers are struggling to keep sales engines running.
The second-hand car market skidded to a halt in the first half of 2024, and though industry insiders hope for a slight uptick, forecasts for 2025 already look like a car crash waiting to happen. The number of repossessed cars zooming past 200,000 this year is only adding fuel to the fire.
This gluttony of gleaming motors should be a seller’s paradise, but with sales from January to June faltering, dealers are strapped for cash to snap up these unwanted wheels. Many of these repossessed rides are in mint condition, with banks and finance companies barely getting the keys back before throwing them on the auction block.
But it’s not all smooth driving. High interest rates on second-hand auto loans and sagging consumer buying power are deflating any chance at higher resale prices, says Vithavat Thongves of the Federation
“We are monitoring car seizures, which keep increasing this year amid the economic slowdown that has lasted for months.”
The year 2023 saw a jaw-dropping 250,000 vehicles seized, a stark contrast to the usual 150,000 to 180,000 in healthier times, according to recent figures.
Yuphin has pointed out that most of these impounded rides are trusty pickups, typically owned by small business operators hit hard by financial woes.
“It’s the small businesses, the SMEs, still reeling from the pandemic and current economic slump, struggling to stay afloat with little liquidity.”
As if things couldn’t get worse, used car dealers have been forced into a brutal price-cutting frenzy akin to the electric vehicle (EV) market price war. The oversupply glut in the used car market has forced many sellers to slash prices just to get customers through the door. Naturally, the longer these motors sit unsold, the more their value nosedives, according to the club.
Pinyo Tanawatcharaporn, head honcho of used car outfit Yo Ratchada and former president of the Association of Used Cars, added that the EV price war is making matters worse.
“The used car market had never been in crisis until Chinese EV makers became powerful players in the global and Thai markets. They are causing disruptions to the automotive industry and its supply chains.”
Some Chinese EV manufacturers have slashed car prices to attract customers, with discounts reaching up to 100,000 baht, said Pinyo. Falling prices have led prospective buyers to delay their purchases, waiting to see if prices will drop further, he explained.
Investment return
In July, EV Primus Co, a local distributor of EVs under multiple brands, including Chinese marque Wuling, launched the compact sedan EV Wuling Binguo in Bangkok for less than 500,000 baht, said EV Primus chief executive Pitaya Tanadamrongsak.
“The retail price was set following a joint discussion between SGMW and my company, which expects to receive an appropriate investment return. This is not a price war.”
SGMW, which stands for SAIC-GM-Wuling, manufactures Wuling vehicles. Pitaya mentioned that companies could sell EVs at low prices due to the reduced cost of lithium-ion batteries, a key EV component, now priced at 100,000 baht. Cheaper auto parts enable manufacturers to offer more competitive prices.
“We will not participate in a price war or price dumping. We have chosen to give our customers the best price since day one.”
Zeekr Intelligent Technology, a Chinese EV maker under the Zeekr brand, stated it would not engage in price-cutting tactics to avoid damaging the reputation of Chinese EVs and eroding consumer trust. The company intends to market its Zeekr X compact electric sports utility vehicles to the luxury segment, said Bao Zhuangfei, head of Zeekr’s Southeast Asia region.
The Electric Vehicle Association of Thailand (EVAT) is closely monitoring EV price trends in the country.
Chinese companies
Former EVAT president Krisda Utamote acknowledged that the decrease in new EV prices impacts second-hand EV sales, but expects the effect to be short-lived.
He attributed the lower prices of new EVs to some Chinese firms’ efforts to reduce their stocks.
Prospects for used car sales are expected to improve in the second half of the year as buyers gain better access to auto loans, despite some ongoing challenges.
Financial service providers frequently reject loan applications due to high debt levels, fearing non-performing loans. However, after discussions with the Association of Used Cars, finance companies may relax their lending criteria, said Vichai Suwanasilar, president of the association.
Financiers have agreed to approve more loan applications from used car buyers if the vehicle is certified by the association, which assists in screening used cars, Vichai explained.
Interest rates for used car loans range from 2.3% to 7%, according to the association, reported Bangkok Post.
Despite these financial relief measures, the impact of banks’ stricter lending criteria is expected to become more apparent next year, Vichai noted.
“A shortage of used cars is possible in the first and second quarters of 2025 due to this year’s sluggish new car sales. This scenario would result in fewer cars entering the used car market.”
