Difficulty in securing loans, price wars: the second-hand car market in Thailand faces multiple challenges!

Wichai Suwansira, the chairman of the Thailand Second-hand Car Association, recently stated that the continuous downturn in Thailand's second-hand car market is mainly due to potential buyers being repeatedly rejected when applying for car loans, and the high level of household debt has made financial institutions cautious about granting car loans, leading to an oversupply in the second-hand car market. According to statistics, the profits of second-hand car rental companies in Thailand in the first half of 2024 have plummeted by 93% compared to the same period last year.

The downturn in the market has led to used car companies closing their businesses and leaving Thailand. CARS24 officially announced on May 7, 2024, that it will close its Thai market but continue to sell its inventory of used cars until they are sold out. According to the business operation data disclosed by CARS24, the total income in 2023 was 1.704 billion Thai Baht, with a loss of 940 million Thai Baht, and the cumulative loss exceeded 2.24 billion Thai Baht, so CARS24 decided not to continue its business in Thailand.

Wichai Suwansira pointed out: "Both the second-hand car and new car markets are facing difficulties in obtaining loans. The difficulty in obtaining car loans not only leads to an oversupply of used cars but also forces dealers to sell their cars at lower prices, which harms their interests."

So, why has the second-hand car market in Thailand turned cold? The reasons behind it involve many aspects, such as Thailand's macroeconomic policy, the automotive industry itself, and the weakness in consumption. However, the most direct reason is the high level of household debt. Although data from the Bank of Thailand shows that the proportion of household debt to GDP has declined, the overall level of debt is still excessively high, causing financial institutions to remain vigilant against the risk of bad loans. Furthermore, the Thai government's "responsible lending" policy has also driven this. Although this policy, which aims to reduce the ratio of household debt, helps improve the quality of debt, it also makes it more difficult to obtain car loans, thereby negatively affecting the automotive market.

(Thai GDP Growth Chart)

The cooling down of the second-hand car market is also affected by macroeconomics and the automobile industry itself. Because the Thai economy is weak in recovery and the government's stimulus measures are limited in effect, the economy has not fully recovered, leading to an increasing number of car owners unable to pay back loans and vehicles being seized, which results in a weak second-hand car market. Factors related to the auto industry include the impact of price wars caused by the falling prices of electric vehicles, which make consumers hold a wait-and-see attitude to the entire auto consumption, further suppressing auto market demand.

(HAUP car rental company in Thailand)

In response to the above impact on the weakness of the second-hand car market, Wichai Suwansira has called on the Thai government to ask the central bank to relax the "Responsible Lending" policy to alleviate the difficulty of auto loans. He believes that although this policy helps to reduce household debt, it also causes too much impact on the auto market.

(Wichai Suwansira, Chairman of the Thailand Second-hand Car Association)

The slump in Thailand's second-hand car market reflects the difficulties facing the Thai economy. High household debt, weak economic recovery, and the impact of government policies together lead to the difficulty of auto loans, thereby suppressing the demand for the auto market. To revitalize the second-hand car market, it requires the government, financial institutions, and the auto industry to work together, take comprehensive measures, relieve the pressure of household debt, improve the business environment, and boost consumer confidence.