The auto loan rejection rate is expected to total 30-40% of applications this year, similar to last year, given ongoing concern over bad debt among lenders, says the Federation of Thai Industries (FTI).
Prospective buyers of pickups are the group most likely to see their loan requests rejected, which will result in continued sluggish sales in the all-important segment, said the federation.
“The rejection rate continues to increase, which will have a wide impact on auto-related businesses along the supply chain, including car seats, tyres, glass and electronic components,” said Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for its Automotive Industry Club.
Banks remain cautious about granting car loans, especially now that the Bank of Thailand has launched its “Responsible Lending” campaign to address the country’s serious household debt problem, he said.
Responsible lending is meant to enhance the quality of household debt and reduce the long-term debt ratio.
The country’s household debt-to-GDP ratio is unsustainably high at 91%, compared with an average of 60% among other emerging economies.
Mr Surapong urged the government to introduce measures to stimulate the automotive industry, which is a core segment of the manufacturing sector and the country’s exports.
According to the club, pickups make up 55% of all car exports, with passenger cars and other types of vehicles accounting for the rest.
Mr Surapong said car manufacturing and exports need to be closely monitored after the Office of Industrial Economics reported that car production decreased for the ninth consecutive month in April, mainly because of stricter loan criteria, weak consumer purchasing power and the economic slowdown.
According to the FTI, car manufacturing decreased by 11% to 104,667 units, with pickup output plunging 45.9%. From January to April, car production was down 17% to 518,790 units.
Domestic car sales in April decreased by 21.5% year-on-year to 46,738 units. For the first four months of the year, car sales were down by 23.9% to 210,494 units.
Car exports fell by 6.8% year-on-year in April, attributed to lower demand from trading partners.
In light of the new figures, the FTI club is considering reducing its car manufacturing target for Thailand this year, said Mr Surapong.
Earlier this year, it set the production target at 1.9 million vehicles, a year-on-year increase of 3.15%, with 1.15 million for export and 750,000 for domestic sales.
Car manufacturers and dealers expect events such as Fast Auto Show Thailand, scheduled from July 3-7, and the Bangkok International Motor Expo, held during the fourth quarter, will help increase car sales in the second half this year.
State budget spending is also expected to stimulate economic activity, which should benefit the automotive industry, he said.