According to the Federation of Thai Industries (FTI), March 2014 auto sales in Thailand declined 46.7% year-on-year (y-o-y), to 83,983 units, bringing sales for Q114 to 224,171 units, a decrease of 45.8% y-o-y. Despite a rise in month-on-month (m-o-m) sales for the past two months, y-o-y growth rates remain firmly in negative territory.
We cautioned in February 2014 that a prolonged stalemate of the country's precarious political situation would result in enduring weakness in the market and exert a downside risk to our forecast ( see 'Slashing Forecasts Due To Political Unrest', February 24). True enough, the volatile situation suggests no meaningful compromise to the ongoing political turmoil and our Country Risk team does not expect the situation to improve significantly over the remainder of the year, which will also result in a weaker growth outlook ( see 'Weaker Growth Outlook Due To Domestic Concerns', April 23).
Against such a backdrop, we believe that monthly vehicle sales will remain at current depressed levels and find it difficult to breach the 100,000 mark for the rest of 2014. Until there is a proper resolution to the crisis, pent-up demand will not come back into the market. Therefore, we have downgraded our full-year sales forecast from a contraction of 12.2% previously, to 21.4%, which will see sales hit 1.05mn units for 2014.
Used Car Segment Facing Pressure
The sales glut in the Thai auto market resulting from the first car scheme has seen the prices of used cars tumble some 30% since the beginning of 2013. Additionally, the used car segment faces strong competition from the new car market due to the latter's lower leasing rates and more attractive promotions. We expect pressure on used cars to remain even more acute, now that there is a glut of supply of new cars in the market.
Our view for a recovery in vehicle sales in now pushed to 2015, when we expect sales to grow 2.6%. However, we forecast only mild annual sales growth of 2.5% on average...
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