Automotive Production in Thailand Declines by Over 25% in September 2024
Thailand’s automotive industry has encountered a sharp drop in production, with vehicle output reaching only 122,277 units in September 2024. This represents a 25.48% decrease compared to September 2023. Both domestic and export markets have felt the impact, as tightening economic conditions and stringent lending practices limit buyer capacity.
Key Factors Behind Thailand’s Automotive Production Slowdown
Decline in Domestic and Export Production
Thailand’s vehicle production for export markets fell by 15.78%, totaling 87,666 units, while domestic production witnessed a steeper decline, with production down by 42.31% to 34,611 units. According to Surapong Paisitpatanapong, advisor to the Federation of Thai Industries (FTI), domestic car sales in September dropped to the lowest level in over four years, with only 39,048 units sold—a 37.11% year-over-year decline.
Stricter Loan Approval Criteria Impacting Buyers
The downturn has been largely attributed to stringent loan approval criteria imposed by financial institutions. With high levels of Special Mention (SM) loans at 208.575 billion baht and non-performing loans reaching 259.330 billion baht as of July 2024, buyers are finding it increasingly difficult to finance vehicle purchases.
Thailand’s Economic Growth Remains Modest
Thailand’s economic growth rate remains underwhelming, with a 2.3% growth in Q2 of 2024 and forecasts indicating a full-year growth rate of around 2.7% to 2.8%. This sluggish growth has compounded issues in the automotive industry, as reduced consumer spending impacts vehicle sales.
Challenges in the Global Export Market
Declining Exports and Middle Eastern Market Challenges
The ongoing conflict in the Middle East has limited shipping routes, affecting Thai exports. As a result, Thailand’s automotive exports fell by 17.67% to 80,254 units compared to last year. Except for Australia, which saw an increase, all major markets have reported declines in vehicle sales.
Year-to-Date Production Figures
From January to September 2024, Thailand produced 774,175 vehicles for export, a 4.42% drop compared to the same period last year. Domestic production during the same period fell by 38.57% to 353,851 units.
FTI’s Revised Production Forecast for 2024
Given the current challenges, FTI plans to revise its 2024 production targets in November. The previous target of 1.7 million units may be lowered, with export targets reduced by 50,000 to 100,000 units and domestic targets decreased by 20,000 to 30,000 units.
Financial Institutions and EV Market Hesitancy
Ongoing strict lending practices continue to limit buyer potential, while uncertainty around electric vehicle (EV) pricing has caused hesitation among consumers. Despite a global drop in lithium prices leading to lower battery costs, concerns persist about potential price surges in 2025.
Looking Forward: Overcoming Challenges in Thailand’s Auto Industry
As Thailand’s automotive sector navigates these economic and logistical challenges, industry leaders are closely monitoring global and domestic trends. The FTI’s upcoming production revision will aim to align industry expectations with current market realities, helping to stabilize and adapt to ongoing shifts in the automotive landscape.
Ref – Thaiger
