Thai auto industry struggles to end 2-year slump

[dozer]

http://asia.nikkei.com/Business/Trends/ ... year-slump

HIROSHI KOTANI, Nikkei staff writer
BANGKOK -- The trouble keeps mounting for Thailand's auto industry, which recently saw new vehicle sales drop for the 25th consecutive month.

New car sales in May dropped 18% on the year to 56,942 units, partly due to political chaos crimping consumer spending. The turmoil in Thailand is a big concern for foreign automakers as well, including leading Japanese manufacturers that largely count on Thailand for the production capacity.

Confusion and sluggishness

Bangkok-based V-Gulliver is a joint venture between V-Group of Thailand and Japan's largest used car dealer, Gulliver International, and operates five used-car stores across the country. In an attempt to boost slumping sales, some new car dealers have cut prices to below those of used cars, according to Katsushi Nomura, managing director of V-Gulliver. This upside-down pricing further discourages consumers from buying used cars. "The optimistic projection is that used car sales will recover in the July-September period, but it may not happen until next year," Nomura said.


A Toyota dealer in suburban Bangkok, like others across the country, struggles to sell new cars.
Close A Toyota dealer in suburban Bangkok, like others across the country, struggles to sell new cars.
The first V-Gulliver stores opened in March 2014 to take advantage of the country's used car market, which was expected to grow rapidly. But the military took control of the government just two months later, throwing Thailand into sluggishness, and V-Gulliver has not been able to expand its store network as much as it had expected.

In May, Toyota Motor, the world's leading car maker, unveiled the first revamp of its HiLux pickup in 11 years. Sales of the new model, however, are "not as good as expected," a salesperson in a Toyota showroom in Bangkok said.

Dampened consumer sentiment is not the only reason car sales remain weak, according to a source from the local subsidiary of Mazda Motor, another Japanese auto giant. Even if someone wants to buy a vehicle, a third of Thai citizens are unable to take out a loan, the source said. This is because banks and other lenders, afraid of being saddled with more bad loans, are screening applicants more strictly.

Car sales this year are expected to hit around 900,000 units, slightly more than the 882,000 in the previous year. Given the 25 months of declines, however, more and more observers are beginning to doubt such predictions.

Stuck in a rut

One factor behind the weakening sales is the vicious circle of delayed economic recovery, caused by political turmoil and shrinking income of agricultural workers, in which consumers are reluctant or unable to buy cars. Since the government of Prime Minister Yingluck Shinawatra collapsed and the military junta under Prime Minister Prayuth Chan-ocha took over, farmers have been paid less in relief money. They are also suffering from a drop in produce prices. The agriculture sector accounts for more than 40% of the country's jobs.

Another factor is the large-scale promotion of new car sales under Yingluck, which brought an unprecedented boom of car ownership to the country in 2012 to 2013. Car sales topped 1.3 million in each of those years, a more than 60% jump from the 2011 figure of 794,000. But part of the surge in sales, it is thought, came from satisfying demand that would normally have come in later years, hence the subsequent slump.

Thailand was the fifth-largest vehicle producer in Asia in 2014, after China, Japan, South Korea and India. More than 90% of the 1.88 million units produced in the country were for Japanese manufactures, including Toyota, Mitsubishi Motors and Isuzu Motors.

Automakers are trying to maintain their level of production in Thailand by ramping up exports from the country, but that is a tall order given the slowdown in the global economy. The "Detroit of the East" is facing its toughest challenge since the massive floods of 2011.
.

[hhfarang]

They should try reducing the taxes (and therefore the prices) if they want to sell new cars. I bought the missus a 2014 Civic here for way less (30%) than we paid for a new one back in 2004 there.