April 2014 Prodcution Figures -126,730 unites, DOWN 25.64% year-on-year
Ipsos Forecast Production 2014 -2.10 million units, DOWN 15.7% year-on-year
Industry Action from Auto Players - Aggressive cost control including scaled-back production and job cuts. An estimated reduction of 35,000 to 45,000 jobs in 2014 across the total value chain- Greater focus on the export market and Thailand’s role as a production hub in ASEAN
Future Outlook -Thailand will remain an important hub within the global automotive industry, strengthened by its ability to manufacture to global standards. New model launches will stimulate domestic demand. With several investors registering interest in Thailand for eco-car development, and major players like Volkswagen and Tata Motors earmarking funds for investment, the Thai automotive industry has a bright future.
Bangkok, Thailand / ACCESSWIRE / May 30, 2014 / Thailand’s automotive industry will fare better than many commentators are expecting, according to the latest forecast from Ipsos Business Consulting.
The most recent statistics show that 126,730 vehicles were produced in April 2014, which is 25.64% fewer than the number of vehicles produced in 2013. Taking into account this fall in production, Ipsos Business Consulting is now projecting total production for 2014 of around 2.1 million units – down 15.7% on 2013.
This latest forecast from Ipsos acknowledges, however, that the export market is performing in line with expectations. Indeed, the latest figures from the Federation of Thai Industries show a rise in total exports, with demand for light commercial vehicles (one-tonne pick-up trucks) remaining particularly strong in territories such as Australia, South Africa and South America.
Colin Kinghorn, Head of ASEAN and Australia at Ipsos Business Consulting, notes that despite this healthy export market, there are some key factors hindering production for domestic consumption. Kinghorn says: "The industry is still dealing with the impact of the Thai government’s First Car policy. Demand for passenger and commercial vehicles for the domestic market has declined substantially since June 2013. In fact, domestic market sales of 1.32 million units for the whole of 2013 were down 8% from the 2012 total of 1.43 million." But Ipsos expects the impact of the First Car scheme to diminish in the second half of this year.
Sanpichit Songpaisan, Country Manager for Thailand, highlights increasing levels of household debt in Thailand, observing that the automotive industry should be wary of potential impact: "The latest Bank of Thailand data shows the ratio of household debt to GDP rising to 82.3% in 2013, up from 77.3% at the end of 2012. The risk for the automotive industry is that finance companies will have to adopt more rigorous criteria for screening and approval of loans, with a knock-on effect on domestic demand." Songpaisan adds that key players in the automotive industry are acutely aware of this situation and the challenge it presents.
Heavy Truck Market Bearing the Brunt
Ipsos Business Consulting expects the heavy truck market to bear the brunt of any downturn in the domestic market, with key players projecting a drop in demand of 35% to 40% in 2014. The political turmoil of recent months has affected this segment relatively strongly, with delays in investment for construction and other large infrastructure projects having a negative impact.
Sanpichit Songpaisan comments: "The overall downturn in the Thai automotive market is also hurting heavy truck manufacturers, as there is less demand for their vehicles within the automotive industry itself."
Although the challenges faced in 2014 are significant, and while recent production and sales statistics are daunting, Ipsos Business Consulting believes there is still time for the industry to rally this year. Noting that Daimler Benz has witnessed a 25% increase in Mercedes Benz sales in the first quarter of 2014, boosted by the launch of its A180 compact model, Colin Kinghorn notes that several other manufacturers have new model launches planned for 2014. In 2014 consumers will see a new City and Jazz from Honda as well as a new Altis from Toyota. "Add to this the release of updated Navara, X-Trail, Triton, and Mazda 3 and we start to see that there is some room for the industry to fight back against falling domestic demand", says Kinghorn.
With the planned investment in eco-car production, and companies like Volkswagen and Tata Motors seeking to invest in Thailand, the medium to long-term outlook for the industry remains positive. Kinghorn highlights Thailand’s unique situation as the only country in South East Asia where every part of the supply chain can produce products of world class standard, suitable for export anywhere. Kinghorn acknowledges that Indonesia has also grown into a strong and strategically important base for automotive production, but goes on to say "It will be several years before Indonesia can develop the entire value chain to the same global standard that Thailand now enjoys. This gives Thailand some breathing space to consolidate its own position as a global hub for the automotive industry. The challenge now is for government and the industry to work hand-in-hand to quickly restore investor confidence and gear up to take advantage of new opportunities coming to the region."
To read more about Ipsos Business Consulting, visit: http://www.ipsosconsulting.com/
SOURCE: Ipsos Business Consulting