The Federation of Thai Industries (FTI) projects that approximately 30-40% of auto loan applications will be rejected this year, mirroring last year’s trends. Concerns persist among lenders regarding bad debt, particularly impacting potential buyers of pickup trucks who are likely to face loan rejections. This ongoing issue is anticipated to have far-reaching effects on various sectors in the automotive supply chain, including car seats, tires, glass, and electronic components.
The cautious approach of banks towards car loans has been further reinforced by the Bank of Thailand’s “Responsible Lending” campaign aimed at addressing the country’s significant household debt levels. This initiative seeks to improve the quality of household debt and reduce long-term debt ratios. Currently, Thailand’s household debt-to-GDP ratio stands at 91%, notably higher than the average of 60% among other emerging economies.
Mr. Surapong Paisitpatanapong, vice-chairman of the FTI and spokesperson for its Automotive Industry Club, has urged the government to implement measures to revitalize the automotive industry, a crucial sector for manufacturing and exports in the country. Pickups constitute a substantial portion of car exports, making up 55% of all exports, with passenger cars and other vehicle types comprising the remainder.
Amid tightening loan requirements and weakened consumer purchasing power, car production in Thailand has witnessed a sustained decline. Production decreased by 11% to 104,667 units, with pickup output experiencing a significant drop of 45.9%. Similarly, domestic car sales are down, with a 21.5% decrease in April and a 23.9% decrease in the first four months of the year.
The FTI club is contemplating revising down its car manufacturing target for the year due to these challenging circumstances. Initially set at 1.9 million vehicles, a rise of 3.15% from the previous year, the target included estimates for exports and domestic sales. Events like Fast Auto Show Thailand and the Bangkok International Motor Expo are anticipated to drive sales in the latter part of the year, along with increased state budget expenditures aimed at stimulating economic activity and benefiting the automotive industry.
