Vehicle production forecast to post modest y/y increase, driven by strong exports.

New vehicle sales in Thailand grew 4.6% year on year (y/y) during November to 76,426 units, according to data released by the Thai Automotive Institute (TAI). Vehicle production during the month rose 3.2% y/y to 163,170 units, even as exports of completely built-up (CBU) units went down 4.6% y/y to 101,650 units. For the year to date (YTD), total domestic sales are down 11.8% y/y at 698,168 units, although production remains in the positive territory with growth of 1.9% y/y to 1.76 million units. Meanwhile, CBU exports by Thai automakers stood at 1.11 million units for the 11 months, marking a growth of 7.6% y/y.

Thai new vehicle industry: November and YTD 2015 (in units)
 

November 2015

% change y/y

YTD 2015

% change y/y

Domestic sales

76,426

4.6

698,168

-11.8

Domestic production

163,170

3.2

1,760,310

1.9

Exports (CBUs)

101,650

-4.6

1,118,245

7.6

Source: Thai Automotive Institute

By brand, the market leader and official compiler of automotive data in the country, Toyota, posted a decline of 15.2% y/y to 24,500 units in November, giving it a market share of 32.1%. Isuzu came second with 11,586 units (down 3.8% y/y), followed by Honda at 10,288 (up 7.1% y/y). Following Honda was Mitsubishi with monthly sales volume of 8,731 units, a jump of 67.2% y/y. Nissan was another player with sales gains as its monthly volume expanded 2.9% y/y to 4,899 units. Growth rates were stronger among smaller automakers. This includes Ford which sold 4,500 units (up 54.9% y/y) and Mazda with monthly volume of 4,197 vehicles (up 66.2% y/y).

Thai new vehicle sales by brand
 

November 2015

% change y/y

YTD 2015

% change y/y

Toyota

24,500

-15.2

236,691

-19.3

Isuzu

11,586

-3.8

124,292

-14.1

Honda

10,288

7.1

99,635

7.0

Mitsubishi

8,731

67.2

50,018

-13.2

Nissan

4,899

2.9

44,851

-16.3

Ford

4,500

54.9

31,233

-9.8

Mazda

4,197

66.2

33,838

7.3

Suzuki

1,562

50.2

18,711

2.2

Chevrolet

1,399

-30.2

15,152

-36.1

Mercedes-Benz

1,270

37.9

10,072

5.1

Hino

1,000

-20.1

10,127

-1.5

Source: Toyota Motor Thailand, the official compiler of automotive data in Thailand.

For the first 11 months, Toyota sold 236,691 units, representing a decline of 19.3% y/y. Isuzu also followed the industry's declining trend as its monthly sales shrank 14.1% y/y to 124,292 units. Isuzu was followed by Honda with 99,635 units, marking a jump of 7% y/y. However, Mitsubishi and Nissan registered double-digit percentage sales declines with monthly volumes of 50,018 and 44,851 units respectively. With YTD sales of 33,838 vehicles (up 7.3% y/y), Mazda emerged ahead of Ford, which registered a sales decline of 9.8% y/y to 31,233 units.

Outlook and implications

Domestic vehicle demand in Thailand has been weak since late 2014, largely reflecting the state of the economy. Sluggish vehicle sales are largely due to persistently high household debt, as well as financial institutions' stringent lending criteria, which have crippled liquidity and consumers' purchasing power. IHS Automotive expects light-vehicle sales in the country to fall for the third consecutive year in 2015 to around 734,538 units, down 12.6% y/y from 840,585 units in 2014. This forecast is lower than the local association's prediction, but in line with Toyota's. Vehicle demand may continue to improve in December, on account of pre-emptive buying by consumers ahead of upcoming excise tax changes in 2016. Effective from 1 January 2016, new excise taxes will raise the prices of models that fail to meet new carbon dioxide emission requirements. Nevertheless, we expect Thai light-vehicle sales to grow 2.6% in 2016 on a low base while the prevailing low interest rate environment may help fuel household spending.

On the production front, total vehicle output is forecast to post a modest 1.1% y/y gain in 2015 to 1,876,621 units and further by 0.4% in 2016 to reach 1,884,210 units, according to IHS Automotive data. Strong export volumes will support vehicle production in Thailand during 2015. The country is an established global vehicle manufacturing centre and a key location in the Association of Southeast Asian Nations (ASEAN) region. It has become an important production base for many global automakers, such as Ford, Mazda, Nissan, Mitsubishi, Honda, and Toyota, as they can gain easier access to sourcing and supply from the ASEAN region and reduce export logistical costs since Thailand has free-trade agreements (FTAs) with several nations. The industry is helped by the fact that most of the world's leading automakers have already set up production bases in the country, mainly to cater to export markets. Despite the domestic market's current stagnation, Thai-built CBU exports are expected to contribute nearly 65% of total vehicle production, and will maintain positive momentum in 2015, with total exports predicted to reach 1.2 million units and is anticipated to grow by 1.4% y/y in 2016 to reach 1.3 million units.

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