End of first-car scheme sees sales fall

Mitsubishi dealers in the North are beginning to experience a decline in customer walk-ins after the First Car Buyer Programme hit the end of the road last year.

Although auto sales in Thailand during the first quarter of the year rose by 48 per cent to 413,256 vehicles, and March sales were the highest monthly sales ever achieved by the auto industry with 157,527 vehicles sold, a large portion consisted of vehicles purchased under the First Car scheme, which is often blamed for stealing future demand from the market.

As for Mitsubishi, the company achieved strong sales in the north last year (more than 164,000 vehicles) as well as during the first quarter of 2013 (45,000 vehicles), with the majority being First Car vehicles.

“But in April, demand dropped by 22 per cent to 13,600 vehicles compared to the previous month when we sold 17,400,” said Mitsubishi Motors (Thailand) president Nobuyuki Murahashi.

“However, that was still lower than the decline in the total market, which is about 30 per cent,” he pointed out, adding that Mitsubishi dealers had predicted the slowdown and prepared strategies to cope with the situation. This includes inventory management and marketing activities to support sales.

Phraeyontrakarn Mitsu managing director Vachiraporn Theeravanichayakul said that as much as 20 per cent of customers who ordered vehicles under the First Car scheme are delaying deliveries.

“Some are not financially ready while some did not pass finance companies’ requirements,” she revealed.Many of the buyers are university students and first-jobbers who have inconsistent income. 

However, there were lower postponements for pickup truck orders, made mostly by farmers.“I am not worried about our stocks at this moment because we have an effective system and teamwork. We still have a booking flow but it’s not as speedy as last year. This year the market will return to normal, and we are looking at other factors that will help maintain demand. For example, the agricultural or average income of Phrae is still in good condition and this keeps up the demand for cars,” she said. 

In Chiang Mai, Mitsubishi sales under the First Car scheme reached almost 40,000 vehicles, putting it in second place after Bangkok.

Tarin Tosangchai, managing director at Sangchai Motor Sales in Chiang Mai, said the government campaign was responsible for as much as 65 to 70 per cent of sales during the second half of last year.

Towards the year-end period, Tarin noticed a slowdown of deliveries for this group. The number of postponements and rejections from financial institutes also increased gradually, which led him to reconsider sales plans.

“I decided to take a risk by placing ‘under-booking’ orders with MMTh. We noticed declining customer quality from the delay in vehicle acceptance and financial status. The very large number of customers who rushed in to apply under the First Car scheme also did not make us confident,” he said.

The fact that there is no deadline for vehicle delivery and acceptance means that the customer can keep on postponing, and the dealer needs to take responsibility for vehicles in stock.

“Finance companies are also being affected, for if the customer does not accept the car then payments won’t start. The firms are even contacting customers so that the contracts can take effect,” Tarin added. “Demand should recover in the latter half. Chiang Mai is a high-growth city in terms of transportation and real-estate projects. The opening of two large department stores later this year also shows the higher potential and purchasing power of residents there. Chiang Mai will resume its status as a high-potential area with quality demand for cars soon,” he said. Murahashi said the northern region has witnessed consistent economic growth, unlike the northeastern region where growth is more dramatic. There are 17 provinces under Mitsubishi’s northern area of business, with 29 showrooms.

“We plan to increase the number of showrooms in the strategic districts in the near future. Due to the shrinkage in demand during the start of the year, Mitsubishi and our dealers had to take countermeasures with promotions, campaigns, events and roadshows. We expect a recovery in the second half of the year, and believe that the northern area market will reach 200,000 vehicles in one to two years.”