Auto lenders expected to refocus 2016 strategy

The motor expo, which is held in December every year, is an indicator of the likely growth of the automobile industry and auto lending for the next year, and the show’s organiser had expressed optimism that bookings for new vehicles at the 2015 expo would reach 50,000 units – the same as last year’s level.
However, cumulative bookings for only 23,893 vehicles were reported during the first nine days of the event, well below expectations. Applications for auto loans at the expo similarly came in below the targeted level.
Furthermore, sales of some larger-engine models, for which several instalment-plan lenders had expected to see greater demand at the show, have also achieved lower-than-forecast bookings.
With the new excise-duty system based on a vehicle’s carbon-dioxide emissions coming into effect on January 1, the prices of cars with large engines will increase, while the prices of cars with small engines – such as eco-cars – will be unchanged.
Several automakers have maintained their prices of larger-engine vehicles at the expo in the hope that this would persuade more buyers to take the plunge ahead of the excise-duty changes.
However, Surat Leelataviwat, managing director of Kasikorn Leasing (KLeasing), said bookings for this category of car had been lower than the company expected and, even though both carmakers and auto lenders were offering low-interest deals for some models, this had failed to boost the level of purchasing thus far.
“Consumers might be waiting to see the actual prices of cars with larger engines, but the market doesn’t yet know yet the new prices of models that will be adjusted in line with the new excise duty,” he said.
The expo results to date show that high debt servicing and lower purchasing power remain the key factors dampening demand, which means KLeasing next year will have to look after existing customers and contact them regularly about marketing campaigns in order to maintain client relationships, he explained.
Moreover, the company will undertake marketing campaigns specifically targeted to each customer segment, he added.
However, the auto-loan sector is expected to perform better in the second half of 2016, the managing director said.Anuchart Deeprasert, chairman of the Thai Hire-Purchase Association, echoing Surat’s comments, said auto-loan providers next year would put more effort into trying to keep their customer base and control the quality of current customers, as opposed to offering campaigns to attract new business.
Consumers continue to worry about the ongoing economic uncertainty, while the likelihood of a further severe drought next year would put additional pressure on the purchasing power of people in the agricultural sector, he said.
Automakers will tend to subsidise the pricing of lenders more than the lenders themselves launching their own campaigns, because the margin in hire-purchase business is not high. He therefore expects competition among auto lenders will not be particularly intense over the course of next year.
Based on the assumption of domestic auto sales in 2016 coming in at 760,000 units, the same as this year’s predicted level, the association estimates new auto lending will also be similar to this year, at Bt330 billion.
New auto loans last year totalled around Bt400 billion.