Thai Market Expected to Continue Decline in 2016

Despite a spurt in sales late in the year, the Thai market, finished 2015 down 9.3% at 799,594 units, marking the third annual drop in a row. Forecasts call for further decline this year.

Toyota Thailand, which collates national sales for the industry, says commercial-vehicle deliveries slipped 2.2% to 500,527 units and the car market dropped 19.1% to 299,067 units.

The 1-ton pickup market, included in the CV segment, fell 5.7% to 396,898 units.

The year ended with December sales up 13.3% to 101,426 units, as buyers headed to showrooms in advance of the implementation of a new auto excise tax structure in 2016.

Toyota deliveries for the month rose 13.6% to 28,566 units, ahead of Isuzu, up 27.8% to 20,003 and Honda, down 6.2% to 12,543.

The car segment fell 5.8% to 34,603 units, with Toyota down 28.1% to 11,243, Honda off 8.2% to 8,960 and Mazda up 242.2% to 3,203.

All the action was in the CV market, where sales soared 26.6% to 66,823 units. Isuzu jumped 27.8% to 20,003 as it overtook usual market leader Toyota, which fell 0.6% to 17,323. Mitsubishi deliveries soared 134.0% to 8,460 for third place.

Within the CV segment, 1-ton pickup sales rose 28.8% to 53,988 units, with Isuzu up 31.0% to 18,766, Toyota climbing 1.3% to 16,573 and Mitsubishi rising 134.0% to 8,460.

Toyota CEO Kyoichi Tanada tells a news conference he experts new-vehicle sales to fall 10% in 2016 to 720,000 units.

“We expect to see greater positive factors including spending by the government and efforts to promote investment from the private sector, new entries by various car makers and the determination to encourage more exports,” he says.

Toyota sees 2016 car sales sliding 11.4% to 265,000 units and CV deliveries dropping 9.1% to 455,000 units. Within the CV segment, 1-ton pickup sales are forecast to be off 8.3% at 364,000 units.

Toyota’s domestic sales target for 2016 is 240,000 units, with cars falling 15.3% to 89,000 and CVs dropping 6.2% to 151,000 units.

“Significantly, we project that the auto market in Thailand will fully recover in the next two years,” Tanada says in a statement to WardsAuto.

He expresses his confidence in Thailand’s potential, despite three consecutive years of falling sales.

“Thailand is still a key driver of growth in this region’s auto market, and is one of the most significant components in Toyota’s global manufacturing landscape,” he says, adding Toyota intends “to continue investing in the country.”

Forecaster Frost & Sullivan also sees a decline for the market this year, but predicts a gentler drop to 780,000 units.

Vivek Vaidya, vice president-mobility for Asia Pacific, says the Thai automotive industry is fast approaching its saturation point, with close to 175 vehicles per 1,000 people and the absence of an end-of-vehicle-life policy.

“Rapid urbanization, averaging at 2.3% per annum, and a mismatch between infrastructure growth and vehicle demand continue to restrain vehicle ownership in Thailand,” he says in a new report.

He predicts the volatility in the export sector is likely to persist this year, putting further pressure on vehicle sales growth.

The expected decline also is based on global economic volatility, subsequent challenges to the exports sector and persistent high household debt in Thailand.

Insufficient growth in Thailand’s gross domestic product of 3.5%, projected over the next five years, is due to low levels of private investment, consumption and global market volatility.

“Lack of high-value-add jobs and productivity constraints, as well as competition for investments from countries such as Vietnam and the pressure to join the Trans Pacific Partnership (TPP) also posed challenges to the Thai economy,” Vaidya says.

But it is not all bad news, as the industry should benefit from the introduction of new models and special promotional campaigns that will be central to automakers’ strategies for Thailand this year.

“There is a growing preference for compact SUVs and crossovers,” Vaidya notes.

Facelifts and complete model changes, such as for the Honda Civic, Ford Focus, Toyota Vios, are likely to help push sales in other key segments, he adds.

Vaidya says a growing middle class and the Thai government’s 8-year infrastructure development program from 2015-2022 worth TB3.3 trillion ($101 billion) further will drive demand for vehicles in the short-to-medium term.

The scale of the Thai automotive sector, with its significant installed capacity, export orientation and strong linkages with global supply chains, also has created a self-fueling natural momentum and economies of scale that help develop the local market, he says.