A drop in domestic car sales and an increase in imported electric vehicles (EVs) from China have caused the Federation of Thai Industries (FTI) to reduce its 2023 car production target to 1.9 million, down from 1.95 million.
Car sales have turned sluggish as financial institutions have imposed stricter criteria in the granting of car loans.
Meanwhile Chinese EVs have gained more market share, following the government's policy to promote the EV industry, said Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for the FTI's Automotive Industry Club.
"We expect car manufacturing for the domestic market to decrease by 50,000 units, or 5.5%, to 850,000 units, compared with the previous projection of 900,000 units," he said.
The club maintains its production target for export at 1.05 million units.
Rising interest rates and a very high level of household debt, currently standing at 90% of GDP, are causing concern among financial institutions regarding non-performing loans, said Mr Surapong.
The Bank of Thailand has increased its policy rate six times since August 2022, rising during that period from 0.5% to 2%.
According to media reports, the central bank's Monetary Policy Committee is expected to raise its policy rate by a quarter percentage point to 2.25% as part of its monetary policy normalisation in an effort to curb inflation.
More imports of EVs from China increased that country's share of the Thai market by 5%, which affected the local production of passenger cars, said Mr Surapong.
Thailand's total car production in June increased by 1.78% year-on-year to 145,557 units, according to the club. For the first six months, the number increased by 5.91% year-on-year to 921,512 units.
Car sales in the domestic market decreased by 5.1% year-on-year to 64,440 units in June mainly because of a drop in pickup and truck sales, following the stricter loan granting criteria.
Trucks imports also hit the Thai market during the same month.