Auto loans from banks are probably 100-200 billion baht lower than expected so far this year because of concerns over non-performing loans, which threatens to affect the entire automotive supply chain, according to the Federation of Thai Industries (FTI).
Stricter lending criteria have been cited as a major contributor to sluggish local car sales, potentially causing the country to miss its car manufacturing target for 2024.
The difficulty in obtaining auto loans has been mentioned frequently by the FTI’s Automotive Industry Club since 2023, when car manufacturers overcame a global shortage of semiconductors and were able to restore production to normal levels.
“All car segments have been affected,” said Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for the club.
According to the federation, low car sales are expected to persist this year, with the loan rejection rate believed to be 30-40% of applications.
Prospective buyers of pickups are the most likely to have their loan applications rejected, said the FTI.
Last year, domestic sales of pure pickups plunged by 31.8% year-on-year to 264,738 units, according to the club. The segment remains weak this year, with sales down 42.2% to 60,678 units during the first four months.
Mr Surapong said earlier that banks remain highly selective about lending money to prospective buyers, especially with the Bank of Thailand's recent “responsible lending” campaign to combat the country’s severe household debt problem.
Responsible lending is meant to enhance the quality of household debt and reduce the debt ratio over the long term.
The country’s household debt-to- GDP ratio is high at 91%, compared with an average of 60% among other emerging economies.
Without government assistance to address the debt problem, car and auto parts businesses will suffer from declining sales and related industries will also bear the brunt, said the federation.
Earlier this month, the FTI’s Iron and Steel Industry Club reported an 11-12% decrease in premium-grade steel sales to the automotive industry during the first four months of 2024 as a result of sluggish car sales.
This decline concerned local steel manufacturers as sales prospects are limited, with steel demand expected to be falling in every industry segment.