Auto sector faces bumpy sales

Auto sector faces bumpy sales

Electric vehicles gain in popularity amid tighter lending conditions

A pickup carries a full load on a road in Nonthaburi. Pure pickup sales are expected to remain sluggish this year as debt is elevated. Pattarapong Chatpattarasill
A pickup carries a full load on a road in Nonthaburi. Pure pickup sales are expected to remain sluggish this year as debt is elevated. Pattarapong Chatpattarasill

The automotive industry is expected to have unequal sales growth this year, driven by motorists' changing lifestyles and choices by lenders.

Electric vehicle (EV) manufacturers will be among the leading vendors, while commercial banks continue to play a decisive role in determining domestic sales, especially in the pure pickup category.

EVs, pickup passenger vehicles (PPVs) and sport utility vehicles (SUVs) are picked as the trends for buyers this year, according to the Federation of Thai Industries (FTI).

The Great Wall Motor factory in Rayong where its Ora Good Cat EVs are produced.

EFFECT OF LOAN RULES

Banks will continue to follow strict criteria when granting loans to car buyers, which will especially affect sales of pure pickups, said Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for the FTI's Automotive Industry Club.

"It will be difficult for this pickup segment to see sales increase as long as financial institutions remain worried over non-performing loans," he said.

Many owners of pure pickups, a type of commercial vehicle, failed to pay instalments and the seizure rate is usually high, said Mr Surapong.

Stricter loan criteria was attributed for the decline in domestic car sales last year.

"In 2023, pure pickup sales plunged by nearly 45% year-on-year in December," he said.

Banks have become more cautious about granting car loans as household debt is estimated at more than 90% of GDP.

If the government launches new measures to help the economy, it will build confidence among businesses and increase the purchasing power of consumers, said Mr Surapong.

"We hope the government can stimulate the economy this year. If so, domestic sales of the pure pickup segment should recover," he said.

Various types of cars, including EVs, are displayed at the 2023 Bangkok International Motor Show.  Pattarapong Chatpattarasill

BRIGHT OUTLOOK

SUVs and PPVs are expected to enjoy higher sales this year because of more affordable prices and their good driving performance, which appeals to motorists, noted the club.

Mr Surapong said he believes SUV sales will increase both domestically and for exports as people can afford this type of vehicle, which is different from 4-5 years ago.

"Previously SUVs were very expensive, with prices exceeding 2 million baht," he said.

"Now the prices of SUVs are lower than 1 million baht, thanks to the market entry of new models from Chinese companies, leading to a price war in the SUV segment."

PPV sales are also expected to increase in the domestic market because they offer both comfort and ride quality on a par with passenger cars, said Mr Surapong.

The accumulated sales of SUVs and PPVs exceeded 28,000 units in the internal combustion engine (ICE) and battery EV (BEV) categories as of late last year, with the figure certain to rise further in 2024, he said.

Surapong: Loan rules limit sales

EV PRICE WAR

In addition to SUVs, the EV category is projected to experience a price war this year as competition intensifies, said Mr Surapong.

Chinese car companies shook up the local market last year by introducing customers to a variety of EV types and sizes, with prices of some models similar to ICE cars.

Rival automakers, especially Japanese firms that have long dominated the Thai market, expressed their concern, he said.

"Chinese EV makers are expected to continue with pricing tactics and launching new models to attract motorists, which will intensify competition in the market," said Mr Surapong.

High interest rates for auto loans will make vehicle prices all the more important, he said.

The popularity of EVs increased in part because the Thai government wants to promote eco-friendly cars, offering incentives to EV manufacturers, which are unveiling various models of EVs in the market.

Under an EV roadmap from 2022 to 2030, the government aims to have BEVs make up 30% of total car manufacturing by 2030, with the production of 725,000 zero-emission cars, 675,000 electric motorcycles and 34,000 electric buses and trucks.

State efforts to make Thailand a regional EV hub are expected to begin bearing fruit this year as global EV manufacturers, especially those from China, have already bought land and started to build EV assembly facilities and design production lines in Thailand.

Krisda Utamote, president of the Electric Vehicle Association of Thailand, said earlier he expects the first locally-made passenger EVs from foreign companies to be launched this year.

An EV charging outlet is shown at the 2023 Fast Auto Show Thailand and EV Expo. EV-related technology is an inseparable part of car events. Wichan Charoenkiatpakul

CHINESE INFLUENCE

Chinese automaker Great Wall Motor opened its Thai EV factory in January after the company entered the Thai market three years ago.

The plant is located in Rayong and has a total capacity of 120,000 units a year. The company aims to initially produce 80,000 vehicles a year.

BYD, which bought 600 rai of land at an industrial estate in Rayong, also plans to operate its first BEV factory in Southeast Asia here in 2024.

The company's facility has an annual production capacity of 150,000 units.

The Shenzhen-based automaker posted global EV sales in 2023 exceeding 3 million units, becoming a top 10 car seller for the first time, the company said on its website.

Analysts attributed the growth of BYD, which was initially known as a rechargeable battery maker for electronic devices, to its battery business, as this helps the company save greatly on costs and increase production capacity of EVs, according to media reports.

Among other active companies, Horizon Plus is a joint venture between PTT's wholly-owned Arun Plus and Taiwan-based Hon Hai Precision Industry Co.

The company plans to open a car assembly facility worth US$1-2 billion in Chon Buri next year with an annual capacity of 50,000 units.

PTT announced it plans to initially help other EV makers investing in Thailand to assemble EVs, rather than spend a large sum to set up a full-fledged facility to make EVs under a new brand.

INCENTIVES

Firms granted an EV incentive package by the previous government are committed to building EV production facilities in Thailand.

Dubbed EV3.0, this package includes tax cuts and subsidies to promote EV consumption and production between 2022 and 2023.

In December last year, the cabinet approved a new EV incentive package, known as EV3.5, to propel industry growth between 2024 and 2027.

The package includes subsidies, reduced import duties for fully assembled cars and an excise tax cut.

By 2030, Thailand's car manufacturing capacity is expected to reach 2.5 million units, with zero-emission vehicles making up 750,000 units and ICE cars representing 1.75 million units, said Yuphin Boonsirichan, chairwoman of the FTI Future Mobility-ONE, a unit aimed at supporting the development of Thailand's automotive industry.

"The FTI expects EV sales in the domestic market to reach 90,000-100,000 units in 2024 as drivers' lifestyles change," she said.

"They want a new driving experience and cars that can help reduce global warming."

Competition in the EV market will ramp up as car companies continue to launch new models with smart technology, sleek designs and attractive prices, said Ms Yuphin.

FTI anticipates the EV price war will continue as manufacturers want to increase sales both in the Thai and overseas markets.

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