Sales Sag As Political Stalemate Drags
BMI View : As Thailand's political stalemate continues, we expect auto sales to remain depressed for some time given that we do not expect any significant improvement to the political situation for the remainder of the year. That said, domestic production will hold up better as local carmakers increase exports to overseas markets.
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. The grim picture is best illustrated by the chart below, which shows that despite a rise in month-on-month sales for the past two months, y-o-y growth rates remain firmly in negative territory.
|Sales Expected To Remain Depressed|
|Thailand - Domestic Auto Sales, Units (LHS); % chg y-o-y (RHS)|
We cautioned in February 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. In our individual segment forecasts, we expect passenger car sales to decline 22.0% and commercial vehicle sales to contract 20.8%, in 2014.
The sharp declines in domestic auto sales have not spared production, given that about half of the local output is for the domestic market. According to FTI, vehicle production in March 2014 was down 29.0% y-o-y, to 181,334 units, bringing output for Q114 to 517,492 units, a decline of 39.4% y-o-y. Given our view of weak demand in the local market for the remainder of the year, this will have a knock-on effect on vehicle production. As such, we have downgraded our 2014 auto production forecast to 2.19mn units, a decline of 10.9%.
However, we have highlighted for some time that domestic production will hold up better than sales as local carmakers increase exports to overseas markets to make up some of the shortfall from the collapse in domestic sales. March's export figures bear this out with vehicle exports hitting a six-month high of 113,313 units, an increase of 8.8% y-o-y.