The decline in domestic car sales is having a broad impact on the automotive industry, even dampening the premium car segment, which typically resists downturns in consumer spending, according to Mercedes-Benz (Thailand).
The sluggish Thai economy coupled with banks tightening auto lending measures to cope with the high level of household debt is affecting manufacturers across various car segments, including luxury, which is usually resilient because of high purchasing power.
"The automotive industry has been impacted by the economic slowdown this year, making it difficult for manufacturers to increase sales, including for general passenger and luxury cars," said Martin Schwenk, president and chief executive of Mercedes-Benz (Thailand).
He said he anticipates total car sales in the country will fall short of a range of 750,000-800,000 units in 2024.
Domestic car sales tallied 775,780 units last year, a year-on-year decrease of 8.6%, according to the Federation of Thai Industries (FTI).
The automotive industry is experiencing intense competition and pressure, making it difficult to forecast Mercedes-Benz's sales volume for 2024, said Mr Schwenk.
Some 13,118 Mercedes-Benz cars were registered last year, while total sales in the country's luxury car segment reached 43,553 units.
Domestic car sales in April this year decreased by 21.5% year-on-year to 46,738 units, attributed mainly to delayed government budget spending, banks' stricter criteria for auto loans and weak purchasing power, said the FTI.
From January to April, car sales plunged by 23.9% year-on-year to 210,494 units.
Despite the decline in total car sales, Mercedes-Benz Thailand sees an opportunity in the electric vehicle (EV) industry, which is being promoted by the government. The company signed a 10-year contract extension yesterday with Thonburi Automotive Assembly Plant Ltd, a long-term partner in car assembly and battery production.
"We embark on a new era as the first luxury car brand to produce batteries and assemble EVs, starting with the EQS 500 4MATIC AMG Premium," said Mr Schwenk.
The company's assembly plant, located in Samut Prakan, has produced more than 13 models of Mercedes-Benz cars, including A-Class, C-Class, E-Class and S-Class vehicles.
He said he is not concerned about the entry of Chinese EV manufacturers into Thailand because they target different markets.
Globally, Mercedes-Benz is focusing on producing plug-in hybrid EVs, which are set to replace internal combustion engine-powered cars by 2025.