Thailand ranks first in light vehicle sales in Southeast Asia, overtaking Indonesia, the leader for five years, says research firm LMC Automotive.
In the first quarter of 2019, the region posted a 2% year-on-year increase in light vehicle sales to 817,099 units. Thailand saw an increase of 11.6% in the first quarter with 258,568 light vehicles sold.
LMC said the growth was driven by new model launches such as Toyota Hilux Revo, Toyota Camry and Mitsubishi Xpander.
"This robust result allowed Thailand to overtake Indonesia in sales terms to become the largest light vehicle market in Southeast Asia in the first quarter," LMC said.
Indonesia sold 232,580 light vehicles during the period, a 13% drop from the same quarter in 2018.
LMC said every car maker in Indonesia suffered a decline, but the best performance by volume terms was Isuzu at 776 units in the first quarter, driven by the new Traga light truck.
The contraction in Indonesia likely resulted from the general election in April, ahead of which consumers and companies took a wait-and-see approach.
"Meanwhile, automakers are trimming deliveries to dealerships before launching several new models and new generations of popular models in the first half of 2019," LMC said.
The research firm said the figures prompted an upgrade of LMC's projection for Thailand's light vehicle sales in 2019, from 974,000 units sold in the previous outlook to 1.03 million light vehicles.
"Our forecast for Thailand remains conservative because lingering political tensions and divisions threaten recovery in private investment," LMC said. "Thai GDP growth is expected to slow from 4.1% in 2018 to 3.4% in 2019, and goods exports decelerated sharply in the second half of 2018 and declined again in the first quarter of 2019."
LMC said the Thai export outlook remains uncertain because of weaker demand and increased trade protectionism in China. This is a key consideration, as Thai exports of goods and services account for 77% of the country's GDP.
But the risk for the Thai light vehicle market is on the upside, driven by two key factors.
First, interest rates remain low. Although the central bank raised its key rate from 1.50% to 1.75% in December, major commercial banks decided to increase deposit interest rates but left loan interest rates unchanged.
The central bank also hinted that it would not implement any further interest rate rises this year.
Second, the central bank is expected to announce tighter auto loan conditions in the second half of 2019. These will not be implemented until 2020.
"Vehicle demand is likely to pull ahead in 2019," LMC said. "LMC's optimistic scenario sees Thai light vehicle sales hitting a high of 1.1 million units, overtaking the Indonesian market."
For Indonesia, LMC has cut its full-year projection from 1.07 million to 1.05 million light vehicles in 2019, down 0.4% from 2018, with downside risk because of changes in the fuel price formula.
"Indonesian fuel prices will start to rise while global prices begin to drop, which may trigger higher inflation and lower consumer spending," LMC said. "Indonesia's GDP growth in the first quarter was slower than expected at 5.07%, and a key economic risk was loss of momentum in household consumption."