The passenger-car segment, which saw its sales skid nearly 10 per cent in 2005 and 5.9 per cent in January, is showing new signs of life, rising by 0.5 per cent year on year in February, thanks to the launch of the Honda Civic and Toyota Yaris.

"With more vehicle models; for instance, Nissan Tiida, Chevrolet Aveo, new Toyota Camry plus another two new pickup models coming on stream during the course of this year, the bullish 800,000-unit sales forecast for 2006 remains achievable," the securities house said.

While historically there has been little correlation between new Thai auto sales and oil prices, it should be noted that a significant factor in Toyota's recent success may well have been the very generous financing terms offered by Toyota Leasing to support its new launches. For example, it charges 2.05 per cent with low down payment for the Yaris. This has prevented interest rates from having a negative impact, the securities firm said.

"Our positive view on the sector is supported mainly by the fact that Thailand's position as the global production base for pickup vehicles has been secured by the recent announcements of Toyota and other major car producers to further expand their presence in the country," it said.

It is estimated that total completely built unit (CBU) exports will reach 800,000 units in 2010, while production is forecast to grow by 16-20 per cent a year over the next five years.

"The obvious winners will be auto-parts manufacturers with significant exposure to the pickup truck market, as pickup vehicles are and will remain for at least the next three years the strength and growth driver of the Thai auto sector," the securities firm wrote.

"However we have also become more bullish about the outlook of the passenger-car segment this year, considering that several new models are coming into the market in 2006.

"We also noticed that the next round of the industry expansion by major carmakers is currently taking place and the emphasis will be on both passenger car and pickup production."

Thailand is the world's largest production base for one-tonne pickups and the 14th-largest vehicle production base.

Exports are becoming the growth driver, with export production now accounting for 40 per cent of vehicle production and growing much faster than domestic sales.

Production is forecast to grow by an annual 15-20 per cent over the next five years.

UOB however said that in the second half, there could be a potential slowdown in domestic sales caused by rising interest rates. Among factors to watch in the last six months of 2006 are the growing market awareness of the explosive expansion of carmakers like Toyota, Nissan and GM/Isuzu, as well as capacity expansion of OEM (original equipment manufacturing) part-makers to catch up with the expansion plans of their auto production customers.

In 2005, Thai vehicle production exceeded the one-million unit mark while both domestic and export markets continued at new record highs. Currently, the Kingdom is the world's 14th-largest vehicle-producing nation and its domestic sales market is 17th.

Domestic vehicle sales rose 12.4 per cent year on year in 2005 to a new record of 703,405 units, driven mainly by 19.3-per-cent growth in the sales of one-tonne pickups, fuelled by the largely successful launch of Toyota's IMV range in late 2004. This comprised the new Vigo pickup and the Fortuner SUV, which despite being essentially a passenger vehicle, is categorised as a pickup for statistical purposes, mainly due to limited new model launches and rising petrol prices.

The sales of passenger vehicles fell 9.9 per cent to 188,211 units in 2005.

CBU exports now account for nearly 40 per cent of all vehicles assembled in Thailand, compared to 11 per cent in 1997.

The country is currently the seventh-largest car exporter in the world. Already, 50 per cent of Toyota's IMV production is exported, just 15 months after its launch.

Toyota maintained its top spot in the local vehicle market, controlling nearly 40 per cent of the market with 277,955 vehicles sold last year.

The Nation