Thailand's cooling car sales may shift economy into lower gear

[webfact]

Thailand's cooling car sales may shift economy into lower gear

By Orathai Sriring and Satawasin Staporncharnchai

 

Visitors try out a Toyota Camry car at Bangkok Auto Salon 2019 in Bangkok, Thailand, July 4, 2019. Picture taken July 4, 2019. REUTERS/Athit Perawongmetha

 

BANGKOK (Reuters) - Efforts by Thailand's central bank to talk down a spike in auto loans amid wider concerns about household debt have sent a chill across the country's car dealers, which are struggling to source finance for new customers.

 

Although the Bank of Thailand (BOT) has taken no policy action yet, analysts say the mere prospect of car loan curbs has been enough to tighten the finance spigot to domestic buyers.

 

While that may take some of the heat out of auto finance, the sudden deceleration threatens car makers, dealers and the wider sector, which has been one of few growth drivers against a backdrop of declining exports and sluggish investment.

 

"Our car sales in April and May fell by 50%," said Sumete Patchuttorn, managing director of Mazda Mahachai.

 

"Finance firms are more cautious about lending now," he said, adding that about 60%-70% of his clients' loan requests were rejected this year, up from 30% in the previous year. More than 80% of car buyers rely on loans.

 

The car industry accounts for about a tenth of gross domestic product in Southeast Asia's second-biggest economy. Bank of Ayudhya said car sales contributed 0.4 percentage point to last year's 4.1% economic growth.

 

GRAPHIC: Thailand's domestic car sales & car exports -

 

Although roughly half the cars are made for export, that part of the sector has also been declining.

 

"A slowdown in car sales this year will also drag down consumption," said Naris Sathapholdeja, head of TMB Analytics, adding car sales contributed a fifth to last year's 4.6% growth in consumption. He sees GDP growth of 3% this year, with consumption up 3.5%.

 

Worried that car loans were driving household debt to one of the highest levels in Asia - at about 80% of GDP - the central bank said in April it had started monitoring car loans and considering loan standards since the beginning of the year.

 

Of particular concern for the central bank is the fact that car loans have the highest delinquency rate among consumer debt products, with 6.9% of them between one- and three-months overdue at the end of March.

 

Analysts said possible central bank curbs could include debt service ratios for borrowers or downpayments required on car purchases.

 

Those possibilities alone were enough to knock annual car sales growth from nearly 20% in 2018, its fastest since 2012, to 3.7% year-on-year in May, its slowest since May 2017.

 

In turn, on-year growth in auto loan volumes has slowed to 11.4% in the first quarter from 12.6% in 2018, the fastest in six years.

 

GRAPHIC: Thailand's household debt vs regional peers -

 

The research unit of Kasikornbank said car sales might contract as much as 6% this year if the BOT required a downpayment of 25% on car purchases.

 

The Federation of Thai Industries expects car sales to rise just 2.4%, said Surapong Paisitpattanapong, spokesman of the FTI's automotive industry division.

 

"The market has been stagnant this year," said Phanumast Rungkakulnuwat, chief executive officer of Autocorp Holding, which sells Honda cars <7267.T>. Last year its sales grew 10%.

 

The BOT predicts GDP growth of just 3.3% this year. Thailand has lagged regional peers for years and is forecast to grow more slowly than any country in Southeast Asia except Singapore.

 

GRAPHIC: Thailand's growth vs regional peers -

 

(Additional reporting by Kitiphong Thaichareon; Editing by Sam Holmes)

 

-- © Copyright Reuters 2019-07-11

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[ezzra]

I remember years whereby the roads were full of red plated new cars, not so much now in fact a lot less then those years, still, thos car dealers should be brought down from their lofty perch and arrogance just a notch...

[PatOngo]

12 minutes ago, webfact said:

"Our car sales in April and May fell by 50%,"

That may have a positive effect in lowering the road carnage.

[cornishcarlos]

3 minutes ago, PatOngo said:

That may have a positive effect in lowering the road carnage.

 

Probably not..

[DrTuner]

Ah, the bourgeoning Thai middle class, as advertised on TVF.

[nickstav]

The Central Bank should monitor all consumer debt practices, not just car sales. This may be bad for business, but good for the average Thai who is getting buried in debt.

[Phuketshrew]

With most not being able to pay off their last car purchase it's hardly surprising that they are not buying new cars again.

[Cadbury]

46 minutes ago, webfact said:

"Our car sales in April and May fell by 50%," 

 

A recession looming perhaps? Exports in decline due to sluggish foreign market, GDP forecasts keep getting readjusted downward, domestic consumption flat; things are not looking too good. Recessions have a history and take time to built and some of the signals have been there for a while.

All this on the watch of the PM and his junta economic wiz kids.  

 

[beddhist]

The figures quoted would make any EU country look good right now. Double-digit growth rates are not sustainable - in fact, any growth has to end one day. But economists and capitalists can't get a handle on this simple fact.

 

Anecdote: a lady in our neighbourhood took out a personal loan - just because she could.

 

It looks like now or in the near future will be an excellent time to buy a car. We just did and while shopping around were offered discounts for cash at most dealers.

[yokat]

1 hour ago, webfact said:

about 60%-70% of his clients' loan requests were rejected this year

 

1 hour ago, webfact said:

it had started monitoring car loans and considering loan standards since the beginning of the year

 

1 hour ago, webfact said:

car loans have the highest delinquency rate among consumer debt products

 

A few things I understand here :

- People are still trying to buy even though they can't pay

- Banks are slowly realizing that handing money to financially irresponsible people is not so profitable

[NCC1701A]

2 hours ago, webfact said:

"Our car sales in April and May fell by 50%," said Sumete Patchuttorn, managing director of Mazda Mahachai.

don't worry. Cars destroyed on the highways rose by 50% in the same period.  

[PhonThong]

How about the fact that Farangs need to keep their money in the bank now? They can't be buying new cars. That might dip their accounts below the Immigration enforced thresholds. 

[BestB]

4 minutes ago, PhonThong said:

How about the fact that Farangs need to keep their money in the bank now? They can't be buying new cars. That might dip their accounts below the Immigration enforced thresholds. 

Yes it’s the farangs who are the main buying force ????

[Moti24]

It's been too easy for Thais to buy cars.  A lot only have them a few months before they are repossessed.  A builder that I often use had a beat-up pickup which must be at least 30 years old; a couple of weeks ago, he bought a new Toyota pickup, and yet he still lives in the same tin shack - work that out.

 

Come December, when imports for personal use are banned, I suspect that car sales will rise again.  There will always be a way, in Thailand.

[BobBKK]

Thailand's cooling car sales may shift economy into lower gear

 

Groan... the copywriter apprentice must have had a birthday and allowed to write a headline

[PhonThong]

3 minutes ago, BestB said:

Yes it’s the farangs who are the main buying force ????

In the village I live in. If Farangs don't spend money, the locals don't get to buy new cars.  Basically,  "what goes around, comes around".

[BestB]

1 minute ago, PhonThong said:

In the village I live in. If Farangs don't spend money, the locals don't get to buy new cars.  Basically,  "what goes around, comes around".

Wow some big spending pensioners must live in your village . And if you all left , village would die of starvation 

[PatOngo]

4 minutes ago, PhonThong said:

In the village I live in. If Farangs don't spend money, the locals don't get to buy new cars.  Basically,  "what goes around, comes around".

Obviously the farangs need to spend more to help reduce the 78% household debt. Thai's will borrow regardless of whether there are farangs or not! They only think of the prize, not the repayments.

[overherebc]

1 hour ago, nickstav said:

The Central Bank should monitor all consumer debt practices, not just car sales. This may be bad for business, but good for the average Thai who is getting buried in debt.

You don't understand do you?

I'll explain.

Income          25,000 baht.

Rent                5,000 baht

Car payment   15,000 baht

Insurance/tax   what?

That leaves 8,000 baht for food, clothes, fuel etc.

Understand now

 

[PhonThong]

39 minutes ago, BestB said:

Wow some big spending pensioners must live in your village . And if you all left , village would die of starvation 

We have two dealerships in town. We used to have 3. The local car dealers and builders confirm that there is less money now that foreigners are holding on to more of their money. If you don't want to believe it, I really don't care..

[BestB]

1 minute ago, PhonThong said:

We have two dealerships in town. We used to have 3. The local car dealers and builders confirm that there is less money now that foreigners are holding on to more of their money. If you don't want to believe it, I really don't care..

Really ? Who in car dealership confirmed for you?good to know you are on such friendly basis with car dealers and builders ????

[NCC1701A]

41 minutes ago, BestB said:

Wow some big spending pensioners must live in your village . And if you all left , village would die of starvation 

not in my village of Hua Hin. Some really nice Mercedes and BMWs here. 

On their way to their one million dollar seaside condo. 

Farang get out of the way or die!  

[boonrawdcnx]

We used to buy a new car every 3 years and trading the old one in.

No more so - a car is like throwing money out the window. Drive away from the showroom in a new car and 100-200.000 Baht are gone down the drain.

Even for Thais the stupid “status symbol” of the car has luckily worn out and most Thais I know now keep their cars much longer instead of always eying a newer model.

Only the really stupid show-offs and thieves who make their money easily keep buying that overpriced crap here.

New Camry in the US between 24600- 32000 US$ in Thailand the Camry with less extras and less safety features - 1.3 - 1.8 million Baht - what a bad joke!
Our car company where we previously bought 4 new cars keeps calling us asking when we want to trade in again - I told them call me again in maybe 10 years - our car is perfectly ok and we can easily drive it another 10 years probably even longer.
We maintain an old Chevy pick-up as our “work horse” and use our sedan for shopping trips, tours and family outings mileage stays low and we will use it for many more years to come.
And if the prices for EV are anything like the car prices are now in Thailand they won’t be driving electric for another 20 years here because nobody will be able to afford a tiny little vehicle that will be in the 2 million Baht price range. Also they can hardly provide a constant electricity supply now throughout the country.




Sent from my iPhone using Thaivisa Connect

[yellowboat]

All my Thai friends complain about the lethargic economy.   This is not a surprise to anyone who does not live in a ritzy compound with 24 hour security or under a rock. 

[HeyHeyHey]

3 hours ago, NCC1701A said:

not in my village of Hua Hin. Some really nice Mercedes and BMWs here. 

On their way to their one million dollar seaside condo. 

Farang get out of the way or die!  

lol you are a joker.... $1 million dollar condo in Hua Hin

 

I bet you value your shack at least at $500,000 ????

[soalbundy]

4 hours ago, BobBKK said:

Thailand's cooling car sales may shift economy into lower gear

 

Groan... the copywriter apprentice must have had a birthday and allowed to write a headline

Tighten your seat belts the industry is clutching at straws as it shifts into lower gear as banks put the brakes on lending

[FarFlungFalang]

5 hours ago, yokat said:

People are still trying to buy even though they can't pay

Have you been talking to my wife again?

[FarFlungFalang]

It may soon be a good time to buy a near new vehicle.

[lipflipper]

With household debt reaching crisis levels something had better be done quickly or another economic meltdown like in October of 1997 is on the horizon for Thailand.

Sent from my CMR-AL19 using Thailand Forum - Thaivisa mobile app

[jabis]

6 hours ago, overherebc said:

You don't understand do you?

I'll explain.

Income          25,000 baht.

Rent                5,000 baht

Car payment   15,000 baht

Insurance/tax   what?

That leaves 8,000 baht for food, clothes, fuel etc.

Understand now

 

25000-5000 = 20000
20000-15000 = 5000

So where did the extra 3000 appear in somchai's food & clothing? ????????