Thailand's automotive industry is facing a significant downturn, with production expected to plummet to a 14-year low in 2024, excluding the pandemic years of 2020-2022. Krungsri Securities (KS) forecasts that auto output could dip to 1.65 million units this year, marking a 10% decrease from the previous year.

The primary factors contributing to this decline are:

1. High household debt levels

2. Increasing non-performing loans (NPLs)

3. Stringent auto loan criteria adopted by banks

4. Weakening consumer purchasing power

The automotive sector has already shown signs of distress in recent months. In May 2024, car production fell by 16% year-on-year to 126,000 units, with pickup truck production experiencing a staggering 55% decline[1]. Domestic vehicle sales also plunged by 23% to 50,000 units, marking the weakest May sales figure since 2009, barring the pandemic year of 2020.

The Federation of Thai Industries (FTI) had initially set an optimistic production target of 1.9 million cars for 2024, representing a 3.15% year-on-year increase. However, given the current economic challenges, this target is likely to be revised downward.

The impact of this downturn extends beyond production numbers:

• Domestic car sales for 2024 are projected to reach only 650,000 units, a 16% decrease from 2023.

• Car exports are expected to decline by 2% to 1.09 million units.

• The Industrial Production Index has been declining for ten consecutive months, leading to reduced working hours and layoffs in factories.

Despite these challenges, there are some potential bright spots:

1. Electric Vehicle (EV) sales: While slightly down year-on-year, EV sales made up 10% of total domestic car sales in May, the largest contribution in four months.

2. Price wars: The ongoing price war among EV makers in Thailand could stimulate consumer interest, particularly as 90% of EVs in the local market are imported.

3. Motor Expo 2024: Scheduled from November 29 to December 10, this event could potentially trigger another price war in the fourth quarter.

4. Government intervention: The approval of state budget spending by the House of Representatives in March is expected to bolster the overall economy.

Experts predict that monthly car production may start to improve slowly in the final quarter of 2024. However, earnings of listed auto companies are expected to continue dropping year-on-year for at least two more quarters.

As Thailand grapples with these economic challenges, the government's role in implementing stimulus measures and fostering economic growth will be crucial in reviving the automotive sector and preventing a prolonged slump in production.