24-9-2024 (BANGKOK) In a concerning trend for Thailand’s automotive sector, the Federation of Thai Industries (FTI) reported on Tuesday that car production in the Southeast Asian manufacturing hub plummeted by 20.56% in August compared to the same period last year. This stark decline, primarily attributed to weakening domestic sales and tightening credit conditions, marks the 13th consecutive month of contraction for the industry.
The August figures paint a bleaker picture than July’s already worrying 16.6% year-on-year decline. The cumulative impact is evident in the January-August period, with car production shrinking by 17.69% compared to the previous year, barely surpassing the one million unit mark.
The domestic market, traditionally a pillar of support for the industry, is showing significant signs of strain. August witnessed a staggering 24.98% drop in domestic car sales compared to the same month last year, a considerable worsening from July’s 20.58% decline.
Thailand, long regarded as the automotive powerhouse of Southeast Asia, has been a crucial manufacturing and export base for global automotive giants such as Toyota and Honda. The country’s speciality in pickup truck production has been a cornerstone of its automotive sector. However, this strength is now being tested by a perfect storm of economic challenges.
Surapong Paisitpattanapong, a spokesman for the FTI, highlighted the root causes of the downturn during a media briefing. He pointed to high household debt levels and a significant tightening of lending conditions by banks as the primary factors suppressing domestic demand. The impact has been particularly severe in the pickup truck segment, a traditional stronghold of Thai automotive manufacturing.
The credit crunch is so severe that Surapong warned of a potential 50% rejection rate for pickup truck loan applications. This financial squeeze is set against a backdrop of alarming household debt, which official data places at 90.8% of GDP in the first quarter of the year, equating to a staggering $484 billion.
The gravity of the situation has forced the FTI to drastically revise its forecasts. In July, the federation slashed its domestic sales target for the year to 550,000 vehicles, down from an initial projection of 750,000 units. Even the burgeoning electric vehicle (EV) sector is feeling the pinch, with sales expected to reach only 76,000 units, falling short of the 100,000-unit target. This underwhelming performance comes despite recent investments from Chinese EV manufacturers like BYD, who have established factories in Thailand this year.
Looking ahead, the outlook remains challenging. The FTI has reduced its 2024 production target to 1.7 million units, down from the earlier forecast of 1.9 million vehicles. This represents a significant contraction from the 1.84 million vehicles produced in 2023.
