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Auto sector is expecting a year of recovery

Auto sector is expecting a year of recovery

Few in the automotive industry will look back on 2014 with fondness

The Thai auto industry may have suffered a terrible year, with domestic sales plummeting by almost 40 per cent during the first 10 months, but many believe the worst has passed and that 2015 will be a year of recovery.
In terms of exports, the impact was less damaging as shipments of completely built-up (CBU) vehicles dropped by a mere 1.25 per cent in the January-to-October period, according to figures from the Thailand Automotive Institute.
While total auto production fell by 25.8 per cent to 1.56 million units and domestic sales plunged by 36 per cent to almost 720,000 units, CBU exports maintained their popularity in the global market, reaching 932,365 units during the first 10 months of last year.
Auto companies believe 2014 could end with domestic auto sales finishing below 900,000 units, despite the introduction of many popular models as well as attractive sales campaigns offered throughout the year.
While passenger-car sales enjoyed tremendous growth during 2012 thanks to the first-car-buyer programme, which offered excise rebates of up to Bt100,000 per vehicle, the populist scheme introduced by the elected Yingluck Shinawatra government was also blamed for creating artificial demand. 
A record 1.436 million vehicles were sold in Thailand that year, and many warned that future demand could be badly affected as buyers rushed to place orders because of the discount.
Apart from the first-car scheme, demand for vehicles had also been piling up because of the 2011 flooding, which caused most auto factories to cease production temporarily, while automakers had also been raising production capacity and investing in more parts production.
In 2013, auto sales dropped slightly by 7.4 per cent to 1.33 million vehicles, despite political protests in Bangkok towards the year-end period aimed at ousting the elected Yingluck government.
The big blow for the industry came early last year as the protests escalated, leading to a coup staged by the military. 
While consumers held back purchases because of the political uncertainty, finance companies also raised the bar for approving auto loans, because of the high rate of bad loans blamed on the first-car tax-break scheme.
“Although there may be demand, many of the potential buyers are not being approved for auto loans because finance companies are becoming stricter in their approval process,” said Wallop Treererkngam, general manager for marketing at Suzuki Motor (Thailand).
During the first half of last year, auto sales declined by more than 40 per cent, and it was only in October that the drop was narrowed to 20 per cent thanks to increased consumer confidence, as well as attractive new models being introduced.
Although it seems that the market has stabilised somewhat, auto sales are not going to see big improvements until the second half of 2015.
Nissan Motor Thailand president Hiroyuki Yoshimoto said last month that according to the Japanese Chamber of Commerce, investors were confident that the Thai economy would recover starting early this year, while the automotive industry would also slowly recover. As consumers are still adopting a wait-and-see attitude, most of the recovery will take place during the second half of the year.
He said the present military-led government was trying hard to revive the economy with stimulus packages, while the political scenario was heading towards elections, which would help dramatically increase consumer confidence.
“With the strong economic foundation of Thailand and a 50-per-cent export ratio for the auto industry, apart from being a global production base, it is believed that the economy will recover in the near future. Although automobile manufacturers have launched many new models and attractive sales campaigns this year [2014], not much purchasing power has come back,” he said.
At the annual “Thailand International Motor Expo” early last month, about 42,000 orders were placed for new vehicles, below the 50,000-unit target forecast by the show organiser.
Nevertheless, the event serves as a strong year-end boost for auto companies as it represents the start of the auto-buying season in Thailand.
Meanwhile, the motorcycle industry also faced a market decline last year, with January-to-October production falling by almost 20 per cent to 1.539 million units. Ten-month domestic sales amounted to 1.46 million units, down 16 per cent year on year, while exports reached 731,685 units, down 3.51 per cent.
 
 
 
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