Thailand vehicle demand looks set to remain weak

FT Confidential Research survey suggests sluggish car demand will persist into 2017

FT Confidential Research’s Car Purchase Index for Thailand dropped to 22.4 in the third quarter, its lowest point since data collection began in 2013. This is a sharp drop from 28.3 in the previous quarter, suggesting tepid sales are likely as we move into 2017.

In the first nine months of 2016, new car sales rose only 0.5 per cent year-on-year following a 9.3 per cent contraction in 2015. Demand for used cars also remains weak: only 7.1 per cent of respondents to our latest survey said they planned to buy a used car in the next six months.

Our latest consumer survey in Thailand suggests that sales growth in the domestic car market will remain negligible for the rest of this year and the first quarter of 2017. Our Car Purchase Index, which measures respondents’ plans for vehicle purchases in the next six months, dropped sharply to 22.4 in the third quarter, from 28.3 in the previous quarter (see chart). This is the lowest reading since FTCR began its consumer surveys in 2013.

Thailand’s car market was distorted in 2012 and 2013 by a tax rebate scheme offered to first-time buyers. Sales of new vehicles jumped 80.9 per cent year-on-year in 2012 to 1.4m units, and stayed nearly as high in 2013 (see chart). However, the programme did little more than front-load purchases, and sales plummeted 33.7 per cent in 2014 and 9.3 per cent more in 2015.

The worst of that hangover has now gone — but demand has improved only marginally this year. In the January to September period sales grew just 0.5 per cent year-on-year.

Even as new car sales stagnate, FTCR survey data show that demand has not shifted substantially towards used vehicles. Among our respondents who planned to buy a vehicle in the next six months, new ones were preferred to used ones at a ratio of 2.2 to 1 (see chart).

In Thailand, as in Indonesia and Malaysia, consumers prefer the convenience and warranty options offered when buying new cars, and also view them as status symbols. More importantly, financing is more readily available for new vehicles: FTCR research, including visits to car dealerships, has found that few Thai consumers buy new cars with cash.