June 13, 2014 00:00 By Kingsley Wijayasinha
Honda COO says 2014 vehicle sales could plunge below 1 million
The sharp slowdown in auto sales during the first half of the year is driving automakers to further lower their sales projections.
While automobile sales peaked at more than 1.43 million vehicles in 2012 thanks to the Yingluck Shinawatra government’s First Car Buyer Scheme and the introduction of new models in the country, sales slowed to 1.33 million vehicles last year. Demand stolen by the populist scheme prevented any growth and the political gridlock that ignited during the final quarter of the year affected consumer confidence, according to auto companies.
Honda Automobile Thailand COO Pitak Pruittisarikorn said vehicle sales in Thailand could even plunge below the 1-million mark this year.
“We think that total auto sales for the industry will drop to 985,000-990,000 units this year,” he said matter-of-factly.
Honda had just launched its new Jazz subcompact on May 22 – the day the army staged a bloodless coup – and bagged more than 3,000 orders in just two weeks.
“Customer response to the Jazz has been above expectations, but what the industry has to do now is to make sure that production corresponds with demand. Auto companies must adjust their production and inventory to minimise the damage,” he advised.
Sales during the first four months of the year have already zoomed downhill by 43.1 per cent to just 297,571 vehicles. Small and fuel-efficient vehicles such as sub-compacts and eco-cars represented the strongest sale segments of the market during the first half of 2014. They offer low fuel consumption as well as affordable pricing, and are gaining increased popularity in upcountry markets, where roads are now good enough for passenger cars.
Pickup-truck sales have been dramatically affected, as farmers were earlier not handed the promised money from the rice pledging scheme, causing a lack of liquidity in the system. Rubber production also declined, resulting in lower demand for pickups.
Since last year, automobile companies have been spinning highly attractive sales promotions to help clear their inventories, and many have matched or even exceeded the First Car Buyer offer that returned as much as Bt100,000 in rebates to buyers.
“Auto sales have been falling continuously as the market returns to normalcy from the First Car Buyer Scheme,” said Toyota Motor Thailand executive vice president Wichien Emprasertsuk.
“The slowing economy is also keeping public debt at a high level, and this makes the public and business sectors more careful about spending and investing. At the start of the year we forecasted that auto sales would finish at 1.15 million units this year, but the figure does not take into consideration the political situation in the country,” he added.
The political tension has created a psychological effect on consumers and investors, and this has affected the kingdom’s economy as well as the automobile market.
Wichien said Toyota expects the market to finish the year with lower sales than originally forecast. “However, we think that if there is clarity concerning the policies of the new government and the political situation returns to normal, the economy will recover,” Wichien said, adding that Toyota, which is the industry compiler for auto sales, will stage a press conference in July, when an updated forecast will be announced.
Despite the military takeover, auto companies are going ahead with new model launches, with Honda introducing the all-new Jazz subcompact last month and Nissan launching its new Navara pickup on Wednesday.
The Navara is a global pickup truck made at Nissan’s new Bt11-billion second plant in Thailand. With an initial production capacity of 75,000 Navaras per year, which will be later raised to 150,000 per year, the new facility will help Thailand maintain its position as Nissan’s largest manufacturing and export centre in the Asean region.
Although Toyota Motor Thailand president Kyoichi Tanada said his company has no plans to relocate existing investments to other Asean countries due to the political situation in the kingdom, he mentioned during Toyota’s annual press conference earlier this year that the company might review future investment plans if the political tangle continues much longer.
While production is down by 27.7 per cent as additional shifts have been lifted due to shrinking domestic demand, export markets for Thai-made autos have been rolling along fine during the first four months of the year. Thailand exported 361,313 CBU (completely built-up) vehicles from January to April this year, reflecting a growth of 1.46 per cent.