Thailand’s 2014 automotive production set to disappoint as Indonesia marches forward
The most recent statistics show that 1,320,000 units were produced up to end-August 2014, which is 22.44% fewer than the quantity produced in the same period in 2013. Taking this fall in production into account, Ipsos Business Consulting is now projecting a best case production scenario for 2014 of around 2.06 million units (down 17% on 2013), but given continuing negative impacts a more realistic scenario would be around 1.9 million units (down 23% on 2013).
This latest forecast from Ipsos assumes that the export market performs in line with market expectations. It is the slump in domestic sales which continues to have a negative impact on growth, with cumulative sales to end-August 2014 down 40% on last year. Major players such as Honda (sales down 40%) and Toyota (down 26%) have already adjusted their own 2014 production forecasts for Thailand downwards.
Colin Kinghorn, Chief Operating Officer at Ipsos Business Consulting, notes Thailand has not experienced any significant change in consumer confidence over recent months. “The domestic market remains in a somewhat depressed state” Kinghorn says. “Perhaps this is best illustrated in the segment where Thailand is placing a great deal of emphasis – the eco car market – where 180,000 units were sold in 2013 as opposed to only 72,000 by the end of July 2014. So, even in a segment at the heart of the Thai government’s growth plans for the sector, we are seeing a decline in sales.”
In May, Sanpichit Songpaisan, Country Manager for Thailand, highlighted the increasing levels of household debt in Thailand, observing that the automotive industry should be wary of its potential impact. “This is still the case and may be more relevant to the industry’s fortunes than the previous government’s First Car Scheme” Songpaisan says. “The rate of household debt in Thailand currently stands at THB 219,000 per household. Not only is the level of debt growing at a faster rate than any other Asian country, but the household level has increased by 16.6% in the last year. This continues to pose significant risks for the automotive industry as well as those involved in auto financing, who will most likely start to adopt much more rigorous criteria for screening and approval of auto loans, with a knock-on effect on domestic demand.”
Indonesia: The Young Pretender
Many commentators expect that Indonesia will take advantage of the ongoing problems of domestic demand in Thailand. And undoubtedly, Indonesia is adopting an aggressive strategy in order to usurp Thailand’s crown as the automotive hub of ASEAN. However, Ipsos Business Consulting notes that Indonesia has also been forced to revise its 2014 production forecast downwards to 1.3 million vehicles from 1.4 million, due to slowing demand in the archipelago. “It seems beyond doubt that Indonesia will overtake Thailand in terms of automotive output; it is just a question of when.” says Songpaisan. “Our view is that it is likely to be 7 to 10 years before Indonesia surpasses Thailand’s production figures. Even then, you will find that Thailand’s component manufacturers are feeding Indonesian as well as Thai automotive supply chains. And Indonesia has to focus much more on improving the quality of production over the entire supply chain, if it is to be seen as a serious alternative to Thailand or China as a production hub for the export market. This gives the Thai industry time to develop and implement its strategy for consolidating its position as the ASEAN automotive hub.”
Future Outlook
We have not seen the expected impact of the launch of new models, with very few manufacturers seeing any benefit from model launches, the Toyota Altis and Mazda 3 being notable exceptions. Many in the industry are looking for significant investment from the Thai government in major national infrastructure projects to provide a much needed boost to the country’s economy and a consequent effect on consumer confidence. Some believe that this investment, along with the launch of new models, can see the industry bounce back to total production of 2.4 million in 2015. However some component manufacturers are not so optimistic and continue to look for new markets for their products, such as the aviation sector.
Whilst medium to long term prospects remains positive, the outlook for 2015 still has a big question mark over it. If the level of household debt in Thailand remains so high, it is difficult to see how the industry can achieve sustainable growth in the short term. The anticipated boost to consumer confidence has not yet materialised in the second half of this year, and it is not immediately apparent when it will occur.
To read more about Ipsos Business Consulting, visit: www.ipsosconsulting.com or Sanpichit Songpaisan, Country Manager - Thailand, Ipsos Business Consulting
Phone: +66 2697 0105 Email: [email protected]
ข่าวIpsos Business Consulting+motorวันนี้
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