Sluggish car sales are expected to plague the Thai automotive industry for at least another 1-2 years, with total domestic sales projected to plunge to 560,000 units in 2024, according to Hyundai Mobility Thailand, a subsidiary of South Korean automaker Hyundai Motor Group.
Sales tallied 775,780 units in 2023.
The market faces several problems, including slow Thai economic growth, weak consumer purchasing power, and strict auto loan criteria from banks and car financing companies based on the high level of household debt.
“The government must be alert to the slowdown in the auto industry. If it does not find ways to help lift the market, the situation will get worse,” said Wallop Chalermvongsavej, managing director of Hyundai Mobility Thailand.
Difficulties in accessing lending is a major factor behind the dip in car sales this year, causing the Federation of Thai Industries’ Automotive Industry Club to reduce its total car manufacturing target to 1.5 million vehicles for 2024, down from 1.7 million, the lowest level since 2021.
In 2023, total car production tallied 1.84 million units. Stricter loan criteria began to dent the market that year, leading to a decline in domestic car sales, especially in the pure pickup category.
“If authorities do not help by launching new measures to stimulate car demand and bankers maintain strict loan criteria, employment in the automotive industry will eventually be affected,” said Mr Wallop.
More workers will lose their jobs next year as employment continues to slow, he said.
Some entrepreneurs, including those in auto parts and car leasing, already adjusted their operations by laying off workers, said Vithavas Thongves, secretary-general of the industry club.
“Hyundai has been affected as loan approval rates for Hyundai cars have fallen to 70% from 90% because banks and financing firms are worried about non-performing loans,” said Mr Wallop.
Though the Bank of Thailand said total household debt represented 89.8% of GDP in the second quarter, down from 90.8% in the first quarter, the debt-to-GDP ratio remains high, affecting banks’ decisions to grant loans.
Hyundai planned to sell 4,100 cars domestically this year, but the actual volume is subject to market variations, he said.
Mr Wallop called on the government to consider reducing the excise tax to lift car sales, along with measures to cope with the household debt problem.
Hyundai is maintaining its plan to expand its electric vehicle (EV) business in Thailand with a 1-billion-baht investment.
The Board of Investment said earlier Hyundai plans to produce battery EVs and batteries in Thailand by 2026.