Auto loans veer off track as political strife takes its toll

Auto loans veer off track as political strife takes its toll

Automobile loan growth during the first half this year is expected to fall to zero as the political turmoil damages the already sluggish economy.

New car models are displayed at the recent Bangkok International Motor Show, which always sparks interest among visitors. TAWATCHAI KHEMGUMNERD

The lingering political instability has taken a toll on the overall economy and dampened demand for commercial pickup trucks and passenger cars, said Kasikorn Leasing (K-Leasing) managing director Akaranant Thitasirivit.

The Yingluck Shinawatra administration's excise tax rebate scheme for first-time car buyers has also been blamed for slow demand for vehicles as the programme, which largely boosted domestic car sales to a record high of 1.47 million in 2012, affected future demand and raised household debt, especially among low-income earners.

The scheme finished at the end of 2012 and almost all cars under the programme have been delivered.

For the first quarter, the industry’s total loans grew by less than 1% year on year in line with the economic slowdown and the sharp decline in car sales. Sales of new cars dipped 45.8% to 244,171.

Mr Akaranant predicted that car sales this year will fall to fewer than 1 million units, well below the Federation of Thai Industries' forecast of 1.2 million vehicles.

Ong-arj Pongkijworasin, the newly appointed chairman of the Federation of Thai Industries' automotive industry club, said recently that the club may revise down its sales projection in the middle of the year after sales in the first quarter did not exceed 100,000 vehicles a month.

Small cars are expected to feel the hardest pinch from the weakening purchasing power, while one-tonne pickup trucks and other trucks could be hit by slower investment and political tensions.

Only the big-bike market is expected to deliver growth this year. In the first quarter, registration of big bikes rose to 5,000 per month on average, up from 4,000 in 2013.

Amid the tough times, K-Leasing, an auto lender under Kasikornbank, has adopted stringent scrutiny of loan expansion to avert rising bad loans.

Despite a 27.4% year-on-year drop in its new-car loan growth for the first quarter to 15.3 billion baht, the company's total lending rose 5.39% to 88.9 billion baht.

K-Leasing's non-performing auto loans accounted for 0.91% of outstanding loans, while its first-quarter net profit was 0.45% higher at 135.8 million baht.

Mr Akaranant said the political uncertainty has hurt consumer confidence, with sales of new cars still sluggish.

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