Used car market in a jam as electric vehicles spark trouble

[webfact]

The used car market is in dire straits, with a shocking downturn blamed on the economic slump, soaring non-performing loans (NPLs), and the growing allure of electric vehicles (EVs), warns Tris Rating.

 

In a jaw-dropping revelation, used car hire-purchase firms have reported a staggering 93% plunge in profits year-on-year for the first half of 2024. Motorcycle hire-purchase companies haven’t fared much better, with profits down by 71%, while truck hire-purchase firms saw a hefty 48% drop, according to a Tris Rating report.

 

“The crux of the issue lies in skyrocketing financial costs and credit expenses, stemming from provisions for bad debts and losses on repossessed vehicles. This is all due to plummeting used car prices, particularly for trucks and cars.”

 

Credit expenses have surged most dramatically in the used car sector, followed by trucks and motorcycles. In the first half of the year, the NPL ratio for truck hire-purchase loans is set to spike from 4.09% at the end of 2023 to 5% by the second quarter. Meanwhile, used car hire-purchase loans have seen their ratio climb from 5.82% to 6.07%.

Interestingly, motorcycle hire-purchase loans have bucked the trend, with their NPL ratio dropping from 4.08% to 3.61%, thanks to increased write-offs leading to a lower loan loss provision ratio. Nevertheless, Tris warns, “the debt quality remains weak.”

 

Rising credit costs from greater provisioning and write-offs raise red flags for many operators. The surge in EV popularity further exacerbates the situation, dampening sales of internal combustion engine (ICE) vehicles, slowing auto lending, and putting downward pressure on used car prices, said Tris Rating.

Repossessed vehicles

 

“The sluggish economy has resulted in a wave of bad debts and vehicle repossessions. Prices for used ICE cars have plummeted by over 20-30%, cutting collateral value and leading many companies to suffer losses from repossessions.”

 

Truck hire-purchase loans are similarly beset by bad debts, with a surplus of repossessed vehicles driving used car prices even lower.

“Tris Rating predicts that in the short to medium term, we won’t see many new players entering the market. This industry requires substantial capital, given the high cost of trucks and the need for a large portfolio to spread risk. Over the next year, the hire-purchase business will likely continue to decelerate, mirroring the sluggish economy and soaring household debt.”

 

To weather these storms, operators must focus on maintaining credit quality.

 

“Competition is expected to be moderate, mainly for quality customers, limiting the ability to increase yields and offset rising costs. Moreover, loan rejection rates will remain elevated.”

 

Looking ahead, Tris Rating expects the sector to remain weak for the rest of 2024, hampered by economic uncertainty and a lack of government support. The drop in EV prices is also set to impact used car auction prices, further squeezing company performance in the coming months.

 

“A more robust recovery in earnings is on the horizon for the second half of 2025, when government stimulus measures are anticipated to kick in and give the economy a much-needed boost.”

 

by Bob Scott Bob
Picture courtesy of Bangkok Post

 

Source: The Thaiger 

-- 2024-09-30

 

 

[lordgrinz]

7 minutes ago, webfact said:

"A more robust recovery in earnings is on the horizon for the second half of 2025, when government stimulus measures are anticipated to kick in and give the economy a much-needed boost.”

 

[OneMoreFarang]

32 minutes ago, webfact said:

The used car market is in dire straits, with a shocking downturn blamed on the economic slump, soaring non-performing loans (NPLs), ...

 

Who cares?

If people can afford to pay for cars and/or have a good credit rating, then they will buy cars.

And if they can't afford them and/or have a bad credit rating, then they won't buy cars.

That seems to me very reasonable.

 

 

[JonnyF]

1 minute ago, OneMoreFarang said:

 

Who cares?

If people can afford to pay for cars and/or have a good credit rating, then they will buy cars.

And if they can't afford them and/or have a bad credit rating, then they won't buy cars.

That seems to me very reasonable.

 

 

 

Trouble is, lots of people who cannot afford cars buy cars. 

[KhunLA]

No surprises there.  New BEVs for less than 2nd hand ICEVs, with higher cost to operate & maintain, and poor performance.

 

Pretty much a no brainer.   Can't wait till the BEV Pick ups hit the market next year.  ICEV auto makers will be taking a big dive down in sales, the next couple years, as people replace their older pick ups.

[OneMoreFarang]

Just now, JonnyF said:

Trouble is, lots of people who cannot afford cars buy cars. 

 

Yes, they do that as long as they get loans.

That's why it's a good idea to don't give loans to people who can't afford them.

[impulse]

7 minutes ago, OneMoreFarang said:

 

Yes, they do that as long as they get loans.

That's why it's a good idea to don't give loans to people who can't afford them.

 

I wonder what percentage of Thai auto loans come from formal sources, and how many come from loan sharks?

 

 

[lordgrinz]

7 minutes ago, JonnyF said:

 

Trouble is, lots of people who cannot afford cars buy cars. 

 

Yeah, I don't understand how spending the same (or more) on a car as they would for their housing makes any sense. It was the first thing I noticed when I moved here, it's just ludicrous. 

[OneMoreFarang]

Just now, lordgrinz said:

Yeah, I don't understand how spending the same (or more) on a car as they would for their housing makes any sense. It was the first thing I noticed when I moved here, it's just ludicrous. 

 

Come on, everybody in the village will see your new car when you drive around. And when you visit the relatives in another province you can't take your house with you, but you will take your shiny new car with you. Look here, I am somebody!

 

 

 

 

[lordgrinz]

5 minutes ago, OneMoreFarang said:

 

Come on, everybody in the village will see your new car when you drive around. And when you visit the relatives in another province you can't take your house with you, but you will take your shiny new car with you. Look here, I am somebody.

 

I mean the average home in America is probably $250,000 to $500,000, excluding California that is, and there aren't Lambos and Ferraris parked in every driveway. Why on Earth would anyone waste so much money on a horrible depreciating purchase? I literally purchased the cheapest SUV I could find, and its been a pretty damn good car.

[wozzlegummich]

My Thai home is in a little village north of Korat. Many homes are dilapidated and about to fall over but always have the latest Hi-Lux or Isuzu pickup in the driveway. it's all about "FACE".

[Dionigi]

where were the facts about electric cars sparking trouble

[OneMoreFarang]

2 hours ago, lordgrinz said:

I mean the average home in America is probably $250,000 to $500,000, excluding California that is, and there aren't Lambos and Ferraris parked in every driveway. Why on Earth would anyone waste so much money on a horrible depreciating purchase? I literally purchased the cheapest SUV I could find, and its been a pretty damn good car.

 

I think you know the answer. It's about status.

Just look how many people run around with starbucks cups. Do they do that because their coffee is so great? Or do people do that to show they can afford that brand - even if they can't really afford it.

 

[hotchilli]

3 hours ago, webfact said:

The used car market is in dire straits, with a shocking downturn blamed on the economic slump, soaring non-performing loans (NPLs), and the growing allure of electric vehicles (EVs), warns Tris Rating.

Second hand values have always been kept high, now they have some competition.

[OneMoreFarang]

1 hour ago, wozzlegummich said:

My Thai home is in a little village north of Korat. Many homes are dilapidated and about to fall over but always have the latest Hi-Lux or Isuzu pickup in the driveway. it's all about "FACE".

Mostly I agree with this and other similar posts.

But it seems to me many Thais spend more time sitting in their cars in traffic than being at home not sleeping.

If I would spend 4h every day in my car then probably I would also buy something nice.

[hotchilli]

2 hours ago, impulse said:

 

I wonder what percentage of Thai auto loans come from formal sources, and how many come from loan sharks?

 

 

How many auto loans come from the auto shops and main dealers?

[BritManToo]

2 hours ago, KhunLA said:

No surprises there.  New BEVs for less than 2nd hand ICEVs, with higher cost to operate & maintain, and poor performance.

 

Pretty much a no brainer.   Can't wait till the BEV Pick ups hit the market next year.  ICEV auto makers will be taking a big dive down in sales, the next couple years, as people replace their older pick ups.

To be fair, new EVs are often cheaper than secondhand EVs.

The problem is the secondhand vehicle market, not the type of engine.

[BritManToo]

2 hours ago, lordgrinz said:

 

Yeah, I don't understand how spending the same (or more) on a car as they would for their housing makes any sense. It was the first thing I noticed when I moved here, it's just ludicrous. 

This was explained to me by a gfs brother ......... he had a home made of sticks and a 1M5bht pickup outside.

"The home is for my wife and family, it won't impress the girls I'm trying to pick up!"

Seemed a good explanation to me.

[TroubleandGrumpy]

2 hours ago, lordgrinz said:

 

Yeah, I don't understand how spending the same (or more) on a car as they would for their housing makes any sense. It was the first thing I noticed when I moved here, it's just ludicrous. 

All about 'face' here - Somchai wants his new pickup, rather than save his money and buy a home.

My BIL bought a brand new top of the range pickup and then strutted around like he was KS. 

I had to work hard not to laugh at him - he saw my smile and thought that was good, and he was pleased.

They are still poor - and now the truck is almost 8 years old and worth SFA - they just dont plan ahead here.

[Captor]

2 hours ago, lordgrinz said:

 

I mean the average home in America is probably $250,000 to $500,000, excluding California that is, and there aren't Lambos and Ferraris parked in every driveway. Why on Earth would anyone waste so much money on a horrible depreciating purchase? I literally purchased the cheapest SUV I could find, and its been a pretty damn good car.

"Face" is most important in Thailand.

[KhunLA]

19 minutes ago, BritManToo said:

To be fair, new EVs are often cheaper than secondhand EVs.

The problem is the secondhand vehicle market, not the type of engine.

I think that's going to change, very soon.   As people realize not only cheaper to buy in, but cheaper to operate & maintain.   People can't stay ignorant forever.

 

If you're going to spend 500k or more, do you really want a used vehicle vs a new one.  Spend 600k or 700k, and you're beyond entry level / get what you pay for specs.

 

I know where my baht would go 😎

[KhunLA]

7 minutes ago, Captor said:

"Face" is most important in Thailand.

Same everywhere, as I know way too many people in the USA, that bought crap (trucks especially) that they didn't need, nor could afford.

 

You can't fix stupid ... that applies worldwide 

[PETERTHEEATER]

2 hours ago, Dionigi said:

where were the facts about electric cars sparking trouble

Burned out.

[stoutfella]

"used car hire-purchase firms have reported a staggering 93% plunge in profits year-on-year". Oh dear, how sad, never mind.

[Burma Bill]

5 hours ago, webfact said:

the growing allure of electric vehicles (EVs),

 

Maybe so, BUT:

 

BYD has informed the Chinese regulator it is recalling nearly 97,000 electric vehicles (EVs) for a manufacturing fault involving a steering control unit that could lead to fire risks, the market regulator said on Sunday. The Chinese automaker is recalling Dolphin and Yuan Plus EVs manufactured in China between November 2022 and December 2023, according to a statement from the State Administration for Market Regulation (SAMR).

 

https://www.hindustantimes.com/business/chinas-byd-recalls-97-000-top-selling-evs-owing-to-major-manufacturing-fault-101727671127369.html

[ukrules]

3 hours ago, Dionigi said:

where were the facts about electric cars sparking trouble

Hidden

[trainman34014]

2 hours ago, KhunLA said:

I think that's going to change, very soon.   As people realize not only cheaper to buy in, but cheaper to operate & maintain.   People can't stay ignorant forever.

 

If you're going to spend 500k or more, do you really want a used vehicle vs a new one.  Spend 600k or 700k, and you're beyond entry level / get what you pay for specs.

 

I know where my baht would go 😎

You forget Thai's can barely count and when it comes to serious financial matters they are almost completely ignorant.

[KhunLA]

1 hour ago, trainman34014 said:

You forget Thai's can barely count and when it comes to serious financial matters they are almost completely ignorant.

And yet, so many more are so more successful than all of the members on AN. ... Go figure.  And don't need to travel to another side of the world to survive and or have sex.

[SAFETY FIRST]

6 hours ago, wozzlegummich said:

My Thai home is in a little village north of Korat. Many homes are dilapidated and about to fall over but always have the latest Hi-Lux or Isuzu pickup in the driveway. it's all about "FACE".

This was the strangest behaviour for me to understand when I first arrived. 

 

I bought in a gated community, My first house was 2.9M baht, most houses were similar in pricing but some of my neighbours had BMW's and Mercedes Benz in their driveways, their cars were around 3M baht. 

 

Back then in Australia you'd buy a car for around 10% the value of your home. 

 

[Will B Good]

6 hours ago, lordgrinz said:

 

I mean the average home in America is probably $250,000 to $500,000, excluding California that is, and there aren't Lambos and Ferraris parked in every driveway. Why on Earth would anyone waste so much money on a horrible depreciating purchase? I literally purchased the cheapest SUV I could find, and its been a pretty damn good car.

 

 

Agree.

 

The car industry survives purely on the back of the male ego......as money goes they are on a par with betting on the gee gees.