25-8-2023 (BANGKOK) The Federation of Thai Industries (FTI) has raised concerns over the increasing number of non-performing loans (NPLs) in the automotive sector, which could potentially impact Thailand’s car manufacturing industry this year. NPLs in the sector have surged by 2.05%, leading to the seizure of 20,000-25,000 cars each month.
In comparison, last year, auto NPLs accounted for 1.89% of the total car loans.
Surapong Paisitpatanapong, Vice-Chairman of the FTI and spokesman for the FTI’s Automotive Industry Club, expressed his apprehension: “If confiscations rise to 30,000 cars a month this year, which is the worst-case scenario, car production cannot avoid a negative impact. However, we still believe this NPL rate will not be a serious concern for global car companies and dealers. They believe banks and financial institutions can deal with granting car loans.”
Earlier this year, the club had to lower its car production target from 1.95 million to 1.9 million due to a decline in domestic car sales and an increase in imported electric vehicles (EVs) from China.
It is anticipated that car manufacturing for the domestic market will decrease by 50,000 units, equivalent to 5.5%, to 850,000 units, down from the previous projection of 900,000 units. However, the club maintains its production target for exports at 1.05 million units.
Domestic car sales have slowed down, mainly due to financial institutions imposing stricter criteria for car loans. From January to July, total car sales witnessed a 5.4% year-on-year decrease, falling from 491,329 units to 464,550 units compared to the same period last year, according to the club’s data.
Sales of pure pickups experienced the most substantial decline among all vehicle types, with a year-on-year drop of 25.5% to 169,994 units, down from 228,070 pickups.
In July, the downward trend continued, with total car sales plummeting by 8.7% year-on-year to 58,419 units, down from 64,033 units. During the same period, sales of internal combustion engine-powered cars declined by 14.3% year-on-year to 47,546 units, while battery EV sales soared by 350% to 4,438 cars, compared to 985 cars in July the previous year.
“Domestic car sales are projected to keep decreasing because of high household debt, banks’ stricter loan criteria, and EV imports,” warned Mr. Surapong.
Thailand’s household debt currently stands at 16 trillion baht, which amounts to 90.6% of the GDP. If debts from loan sharks are factored in, this figure could soar to 120% of GDP, according to Kriengkrai Thiennukul, Chairman of the FTI, who emphasized that this issue is a significant challenge for the new government.
Mr. Surapong stressed the need for the new government to implement measures to stimulate the economy and ease auto lending rules in the second half of the year. Such actions are crucial to reducing household debt and bolstering domestic car sales.
Despite these challenges, Thailand’s car production in July increased by 4.7% year-on-year to 149,709 cars, driven by growing overseas demand and expanding exports. From January to July, total car production rose slightly by 0.6% year-on-year to 1.07 million units, primarily due to a slowdown in domestic sales.
Higher interest rates have been among the factors impacting car production. On August 2nd, the central bank’s Monetary Policy Committee unanimously voted to raise the policy rate for the seventh consecutive meeting, increasing it by 0.25 percentage points from 2% to 2.25%.
