High debt drags down the Thai car market, FTI significantly lowers production and sales targets, folks can't afford cars anymore?

The Federation of Thai Industries (FTI) has lowered its car production target for 2024 from the originally planned 1.9 million units to 1.7 million units due to persistently sluggish car sales. The decision was announced on Thursday, with the FTI also reporting that total car output in the first half of this year was down 17.3% year-on-year to 761,240 units, of which 245,047 were sold domestically and 516,183 were exported. In June alone, total car output plummeted 20.1% year-on-year to 116,289 units.

FTI Vice President Surapong Paisitpatanapong said: "In light of this situation, we need to adjust our production targets for 2024 and lower our forecasts for domestic car output." The club had previously set a production target for domestic sales of 750,000 units, but due to persistent sluggishness in domestic car sales, this has now been revised down to 550,000 units.

Mr. Surapong attributed the drop in car sales to high levels of household debt, low income levels and slow economic growth.

The current household debt to GDP ratio is 91%, which leads banks to tighten their loan standards for car loan applicants. Fears of bad loans are making banks more cautious in their lending. Data from the Office of Industrial Economics shows that the manufacturing production index fell 1.5% year-on-year in May, highlighting the downturn in manufacturing, particularly in the automotive industry.

Since last year, automakers have been facing sluggish domestic car sales, with total car sales down 8.6% year-on-year in 2023. In the first six months of this year, total domestic car sales were down 24.1% year-on-year to 308,027 units. Sales of internal combustion engine cars in the passenger car category plummeted 36.4% to 82,660 units. Pure pickups and pickup passenger cars fell sharply by 40.1% and 43.3% to 89,581 and 18,856 units respectively.

Domestic sales of pure electric cars in Thailand grew 6.9% year-on-year to 33,508 units, accounting for 10.8% of total car sales in the first six months. Club data shows that car exports fell slightly by 1.8% to 519,040 units in the first half of this year.