We have downgraded Thailand's domestic auto sales growth forecast, and expect auto sales to contract 35.0%, a more severe contraction compared to the 30.2% decline forecasted previously. Weak sales for the first nine months of 2014 have been broad based, impacting both passenger cars and commercial vehicle segments. The slowdown is largely attributed to a sluggish economy, weighed down by an uncertain political climate. According to Toyota Motor Thailand, sales for passenger cars and commercial vehicles declined by 45.0% year-on-year (y-o-y) and 30.1% y-o-y respectively. For the overall auto sector, sales contracted by 37.3% to 648,410 units over the same period.
The outlook for the sector remains weak for the remaining months of 2014, and we forecast passenger car sales to contract by 42.0% in 2014. Sluggish demand will largely be attributed to demand coming off a high base, a weak economy and higher interest rates on auto loans. However, we are positive on the sector's growth in 2015, and forecast sales to grow moderately by 3.9%. A recovery in auto sales will be backed by Thailand's strengthening economy, and demand coming off a low base after a year of severe contraction. Phase two of the country's eco-car scheme will also provide a boost, given that applications by various automakers for the scheme have been approved by Thailand's Board Of Investments. However, we expect production for the segment to be mainly export focused, given that domestic interest in eco-cars appears to be waning.
On the commercial vehicle (CV) front, we forecast CV sales to contract by 28.7% in 2014, and expect CV sales to remain sluggish, although a pickup in construction activity should result in a moderation of the slowdown seen in the segment. As with the passenger car segment, we see the CV market recovering in 2015, and forecast CV sales to grow by 3.1% in 2015.
Despite the slowing domestic auto market resulting sharp decline in production (contraction of 27.0% y-o-y),...
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