Auto sales zoom past expectations

Auto sales in the first half of 2012 have surpassed expectations, with 606,523 vehicles being sold, up 40.4 per cent compared to the corresponding period last year. 

Commercial vehicle sales grew by 46.3 per cent while car sales were up by 33.1 per cent. 

The increasing demand for automobiles stems mainly from the government’s First Car Buyer Programme stimulus package, which Toyota admits has contributed to 50 per cent of Vios and Yaris subcompact sales. Toyota, the most popular brand in Thailand, sold 241,245 vehicles in the first six months of the year. 

Meanwhile, maximum production capacity is being achieved by a number of manufacturers, while many may even raise their production capacity with an eye on future growth. 

Many brands have enjoyed growth of more than 40 per cent, while brands like Honda have been posting even bigger sales numbers after disruption problems last year. 

Toyota nearing vehicle production of 1 million 

Two years ago, Toyota announced it planned to produce 1 million vehicles per year in Thailand in 3-5 years, but things seem to have accelerated. 

Toyota Motor Thailand president Kyoichi Tanada said earlier this week that due to the increased demand, the company will raise production by another 50,000 vehicles, (from 815,000 to 865,000), and forecasted that auto sales in Thailand (comprising every brand) would hit a record 1.2 million vehicles (up 51.1 per cent) this year. 

The passenger car market would reach 553,900 while the commercial vehicle market would reach 646,100. 

“And we are confident that next year the market would continue to grow, initially by about 10 per cent,” he told reporters. 

 

TAIA confirms 10% growth in 2013 

Piangjai Kaewsuwan, president of the Thai Automobile Industry Association (TAIA) and Nissan Motor Thailand’s government relations manager, said growth is expected since the market “disappeared” last year. 

“Last year the Thai auto industry as well as the global industry faced two major natural disasters – the East Japan earthquake and tsunami as well as the Thai floods,” she said, adding that as many as 300,000 vehicles were not assembled. “This is frightening, as we lost opportunities and more than Bt100 billion in earnings.” 

She noted that the 40-per-cent growth during the first half of 2012 is no surprise, since there are many positive factors including the First Car Buyer Programme and the economic recovery after the great flood, along with increased demand. The only problem for the industry is getting back its production capacity lost during the massive flood last year. 

“If you ask me whether the trend will continue through next year, the answer from the TAIA, after studying the scenario, is yes, the momentum should continue next year,” she said. “This means the total market will be more than 1.2 million units, and there are signs that it could grow by 10 per cent compared to this year. This is mainly due to the fact that the government has extended the vehicle delivery period for the First Car Buyer Programme to March 2013. The deadline could even be extended to mid-2013 if auto-makers ask for an extension as they have yet to fully recover from damages caused by the mega flood. But this will have to be discussed once again with the government. The industry has back orders of as many as 200,000 vehicles, and the 500,000-vehicle target designated by the government under the First Car programme will surely be reached. The TAIA and the Excise Department recently came up with this figure.” 

Low interest rates are also a major boost, as 80-90 per cent of Thai auto buyers purchase vehicles through financing. 

Piangjai said the export markets are still expandable, although the American economy is slowing down and the Euro-zone crisis has yet to ease. 

“But the Asia-Oceania and Asean markets are growing and booming, so there is demand and these are major export markets for the Thai auto industry,” she pointed out. 

 

3-million-vehicle production coming sooner than expected 

According to the TAIA, even though the Federation of Thai Industries (FTI) has set a production target of 3 million vehicles by 2017, this is a highly conservative target, said Piangjai. 

“This means that if the industry grows without any interruption, the 3-million-vehicle target should be achieved sooner than planned. Toyota alone aims to produce almost 900,000 vehicles this year. Add that to the production increases of other Japanese manufacturers as well as those from Europe and the US and the figures are convincing. We are also preparing to welcome additional investment from many auto-makers in the near future, especially Japanese brands that want to lower production costs due to a stronger yen. We will see this very soon, and the direction of the Thai automobile industry will move towards higher technology,” she said. 

“This expansion can be handled by auto companies both in terms of capital and workforce, but the problem might be with parts makers and whether they are able to supply enough parts for the planned growth in the auto industry. Auto-makers are also stepping in to help suppliers,” Piangjai added. 

 

Finance sector ‘upping target as well’ 

According to Kasikorn Research Centre, the Thai auto market has the opportunity to grow continuously during the second half of this year and reach historic levels due to positive factors such as a generally good economy, warm response for new model launches, the First Car programme and the recovery of auto production capacity. 

Like Toyota, Kasikorn Research is also of the opinion that auto sales will reach 1.2 million vehicles, up from the previously forecasted 1.1 million. 

It has also raised the outstanding automobile hire-purchase loans in the commercial sector by another Bt30 billion to Bt860 billion, an increase of 40 per cent (previously it anticipated growth of 35 per cent). This comes from the assumption that 1.2 million vehicles will be sold this year. 

According to Kasikorn Research, auto sales of 115,943 vehicles in May point to the returning production capacity after the mega flood. Meanwhile, finance companies have submitted auto hire-purchase agreements that are 20 per cent higher during the second quarter of the year due to the rising auto sales. 

The remaining part of the year (considering the Euro-zone crisis does not worsen) will see the auto financing market grow due to an economic recovery, rather stable interest rates, as well as the First Car programme, the introduction of eco-cars and model changes. 

 

Suppliers prepare for stiff competition 

Apart from Japanese parts suppliers, who are expected to make large investments in Thailand, European and American tier-1 suppliers are also closely watching the growth in this region. 

For example, European parts maker Continental is being considered as a technology-based supplier, especially for high-pressure commonrail fuel injection systems for the new Ford Ranger and Mazda BT-50. 

Continental Automotive (Thailand) managing director Thomas Chambers, who is also responsible for the Asean and Australian markets, said the company is confident of growth in the region, and has put together a 3-5 year plan that would result in Thailand producing more auto parts for the global market, as well as raising the local content of component parts to 70 per cent from the current 40. 

The company recently invested Bt600 million for additional machinery at its Amata City factory. 

The plant is presently running at 50 per cent capacity for piezo injectors (2.5 million units per year) and high-pressure fuel pumps (500,000 units per year). It expects to achieve full capacity in 2014. 

“We have just recently entered the Thai OEM market, and if our clients grow in Thailand and around the globe in terms of sales, and there is a positive trend for the economy, the chances are higher that our parent company will invest more money,” he said. 

“The AEC [Asean Economic Community] will also help markets in this region to grow. Apart from pickup truck components, we supply parts to eco-car manufacturers,” Chambers said, adding that Thailand will become Continental’s production and export base in the future.