Thai new vehicle sales decline 10.5% y/y in September; production, exports continue to rise

New vehicle sales in Thailand fell 10.5% year on year (y/y) during September to 61,869 units, according to data released by the Thai Automotive Institute (TAI). Vehicle production during the month rose 4.4% y/y to 171,496 units as exports of completely built-up (CBU) units climbed an impressive 28.1% y/y to 124,952 units. The Thai vehicle market continues to exhibit weakness due to deteriorating liquidity and consumer purchasing power. On a month-on-month basis, however, September's total was almost unchanged from August's volumes of 61,991 units, a 1.9% improvement from July. For the year to date (YTD), total domestic sales are now down 14.6% y/y at 553,832 units, although production remains in positive territory with growth of 1.7% y/y to 1,431,759 units. Meanwhile, CBU exports remain upbeat for Thai original equipment manufacturers (OEMs), totalling 905,366 units for the YTD, up 7.9% y/y.

By brand, the market leader and official compiler of automotive data in the country, Toyota, posted a decline of 6.2% y/y to 22,515 units in September, giving it a market share of 36.4%. Isuzu came second with 10,642 units (down 11.7% y/y), followed by Honda with 8,221 (down 18.4% y/y), Mazda with 3,396 (up 14.5% y/y), Nissan with 3,319 (down 28.9% y/y), Mitsubishi with 3,244 (down 35.4% y/y), Ford with 3,073 (up 13.7% y/y), Chevrolet with 1,773 (up 8.2% y/y), Suzuki with 1,536 (up 4.4% y/y), Mercedes-Benz with 940 (down 25.2% y/y), and Hino with 827 (down 21.6% y/y).

For the YTD, Toyota has sold 189,218 units, representing a decline of 20.4% y/y. Sales at Isuzu total 101,979 units (down 15.1% y/y), followed by Honda with 79,648 (up 6.7% y/y), Nissan with 35,693 (down 18.7% y/y), Mitsubishi with 34,946 (down 26.2% y/y), Mazda with 26,361 (up 1.3% y/y), Ford with 23,276 (down 19.3% y/y), Suzuki with 15,808 (down 1.6% y/y), Chevrolet with 12,040 (down 40.2% y/y), Mercedes-Benz with 8,017 (up 5.3% y/y), and Hino with 7,275 (down 8.9% y/y).

Outlook and implications

Domestic vehicle demand in Thailand has been weak since late 2014, largely reflecting the state of the economy. Sluggish vehicle sales are largely due to persistently high household debt, as well as financial institutions' stringent lending criteria, which have crippled liquidity and consumers' purchasing power. IHS Automotive expects total industry sales to fall for the third consecutive year in 2015 to around 759,483 units, down 12.02% y/y from 863,215 units in 2014. This forecast is lower than the local association's prediction), but in line with Toyota's. Despite the first-half sales slump, demand is expected to slightly improve during the second half, boosted by several new launches such as the Toyota Hilux Revo, the Toyota Fortuner, the Mitsubishi Pajero Sport, and the Suzuki Ciaz eco-car sedan. IHS Automotive expects that demand could be pulled from 2016 to the fourth quarter of 2015 to avoid price increases from the new automotive excise tax criteria. Effective from 1 January 2016, the new excise tax will raise the prices of models that fail to meet new carbon dioxide emission requirements. In addition, the current low interest rate will boost household spending, increase business-sector investment, and improve export potential. Honda is the only brand with significant growth, up 6.7% y/y so far, thanks to successful launches of the compact Honda HR-V sport utility vehicle and the compact Honda Mobilio multipurpose vehicle. Most of the other top brands' figures have declined or grown less than 1%. Toyota, the perennial sales leader, has lost almost 3.5% share in the country so far this year, although the company is hopeful its share will recover after it launches the popular Toyota Hilux Revo and the new generation of Toyota Fortuner.

On the production front, total vehicle output is forecast to post a modest 1.2% y/y gain in 2015 to 1,901,079 units, according to IHS Automotive data. Although vehicle production has remained under pressure during most of 2015, output of A- and B-segment models is expected to continue growing during the second half of this year, driven by the new model launches under the second phase of the Thai government's eco-car project, including the Mazda2, Suzuki Ciaz, and MG 3. Furthermore, production of pick-up trucks is also forecast to grow, helped by models such as the Nissan Navara and Mitsubishi Triton, exports of which began earlier this year.

Strong export volumes will support vehicle production in Thailand during 2015. The country is an established global vehicle manufacturing centre and a key location in the Association of Southeast Asian Nations (ASEAN) region. It has become an important production base for many global automakers, such as Ford, Mazda, Nissan, Mitsubishi, Honda, and Toyota, as they can gain easier access to sourcing and supply from the ASEAN region and reduce export logistical costs since Thailand has free-trade agreements (FTAs) with several nations. The industry is helped by the fact that most of the world's leading automakers have already set up production bases in the country, mainly to cater to export markets. Despite the domestic market's current stagnation, Thai-built CBU exports are expected to contribute nearly 60% of total vehicle production, and will maintain positive momentum in 2015, with total exports predicted to reach 1.2 million units.