26-7-2023 (BANGKOK) Thailand’s automotive industry is facing challenges as a decline in domestic car sales and a surge in imported electric vehicles (EVs) from China have prompted the Federation of Thai Industries (FTI) to revise down its 2023 car production target. The FTI now aims for a production figure of 1.9 million vehicles, down from the initial target of 1.95 million.
The sluggish car sales can be attributed to stricter car loan criteria imposed by financial institutions. As a result, potential buyers are finding it harder to secure loans for purchasing cars, leading to a drop in demand.
Meanwhile, Chinese EVs are gaining popularity in the Thai market, benefiting from the Thai government’s supportive policies to promote the EV industry. This has resulted in a larger market share for imported EVs from China. Surapong Paisitpatanapong, vice-chairman of the FTI and spokesperson for the FTI’s Automotive Industry Club, acknowledged the impact of this trend.
The Automotive Industry Club foresees a reduction of 50,000 units, or 5.5%, in domestic car production, now projected to reach 850,000 units instead of the earlier target of 900,000 units. However, the club maintains its export production target at 1.05 million units.
The rise in interest rates and the high level of household debt, currently accounting for 90% of GDP, have raised concerns among financial institutions about the risk of non-performing loans. The Bank of Thailand has raised its policy rate six times since August 2022, reaching 2% from the initial 0.5%.
In addition to the domestic economic factors, the increase in EV imports from China has contributed to a 5% rise in the Chinese market share in Thailand. Consequently, the local production of passenger cars has been affected.
In June, Thailand’s total car production saw a modest increase of 1.78% year-on-year, reaching 145,557 units. For the first half of the year, the production figures rose by 5.91% year-on-year, totaling 921,512 units.
On the other hand, the domestic car sales experienced a 5.1% year-on-year decline in June, with 64,440 units sold. The drop can be attributed to decreased pickup and truck sales, largely influenced by the stricter loan granting criteria. Furthermore, imports of trucks also contributed to the market dynamics during the same period.
The FTI and other stakeholders in the automotive industry are closely monitoring the evolving situation, aiming to adapt their strategies to the changing market conditions and maintain the sector’s competitiveness.
