2013-12-25 21:56:06 - Recently published research from Business Monitor International, "Thailand Autos Report Q1 2014", is now available at Fast Market Research
According to Toyota Motor Thailand, Thai vehicle sales contracted 28.6% year-on-year (y-o-y) in September 2013, to 94,945 units. In August, we expressed our view that sales declines in the market following the end of government subsidies in 2012 continue to weigh heavily on the market (see 'Softening Domestic Demand Prompts Sales Downgrade', August 19 2013). The widening of the negative y-o-y sales growth rates since then attests to the lingering hangover effects stemming from the withdrawal of subsidies.
Downgrading LCV Sales But Upgrading Car Sales Forecast
Sales in the pickup segment continue to remain weak, with 9M13 sales declining 6.8% y-o-y, to 448,074 units. We are downgrading our already bearish 2013 light commercial vehicle (LCV) sales growth forecast from -10.0% to -14.0%,
to 572,851 units.
On the other hand, we realise that we were too pessimistic about passenger car sales. With monthly sales currently stabilising at around the 48,000 units level, we have decided to upgrade our full-year 2013 growth forecast to -3.8%, from -7.0% previously. This would bring passenger car unit sales to 644,496 for the year. As a result of these modifications, we have also revised our total vehicle sales growth forecast for 2013 to -8.0%, from -7.6% previously, with sales reaching 1.32mn units.
Full Report Details at
Sales To Stage Mild Recovery In 2014
With the low base effects of 2013 in place, the stage is set for the market to rebound in 2014. However, we expect the recovery in sales to be modest, as high levels of household debt remain a cause for concern. Furthermore, given the rise in loan defaults due to the first car scheme, which saw many consumers take on loans they could not afford, lenders are likely to become more judicious in assessing the credit worthiness of vehicle buyers before granting them credit. As such, we forecast vehicle sales to grow 2.0% in 2014, to 1.35mn units.
According to the Federation of Thai Industries, Thailand's domestic auto production for the first 10 months of 2013 came in at 2.12mn units, an increase of 7.1% y-o-y. However, vehicle production in October declined 4.8% month-on-month and posted the lowest absolute figure since April.
Although some plants in Amata Nakorn Industrial Estate were temporarily shut down in October owing to flooding from heavy rains, we believe the actual disruption to vehicle production has been minimal. This is in contrast with the situation in 2011, when devastating floods ravaged the country's entire automotive supply chain. On the contrary, October's weakness was part of a larger structural trend.
That said, we believe auto production has somewhat stabilised and expect output in the last two months of 2013 to be a shade under 400,000 units. While we downgraded our 2013 production forecast in August due to our expectation of ongoing weakness in the domestic market (see 'Production Faces Challenges In Coming Months', August 27 2013), the fallout from the end of subsidies has been more severe than expected, and we therefore are further revising down our forecast. We have downgraded our 2013 production growth forecast to 1.6%, to 2.49mn units, from 4.1% previously.
Production To Grow Steadily In 2014...
For 2014, we expect auto production to continue growing at a steady pace and forecast 2.8% growth, to 2.62mn units. One supportive factor for auto manufacturing will be our expectation of a mild recovery in 2014 domestic auto sales on the back of the low base effects of 2013.
Protests Highlight Risk To Investment
In the worst-case scenario (see 'Assessing The Political Turmoil', November 26 2013), a forced change in the government would adversely affect business and consumer confidence in 2014. Also, delays in government infrastructure projects due to a lack of parliamentary support would hurt demand for commercial vehicles and ultimately their production.
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