In a significant move reflecting the ongoing struggles within its automotive sector, Thailand has revised its car production target for 2024. The Federation of Thai Industries (FTI) announced on July 25th, 2024 that the target has been reduced from 1.9 million units to 1.7 million units, citing persistent sluggish car sales and broader economic challenges.

Factors Behind the Target Reduction

The decision to cut the production target comes as the Thai automotive industry grapples with multiple headwinds:

• Sluggish Domestic Sales: Domestic car sales have been notably weak. From January to June 2024, total car sales in Thailand declined by 24.1% year-on-year to 308,027 units. This decline is attributed to high household debt and low household income, which have led banks to tighten lending criteria for auto loans.

  
  

• Economic Slowdown: The overall economic environment in Thailand has been sluggish. The Manufacturing Production Index dipped by 1.5% year-on-year in May 2024, highlighting the broader challenges facing the manufacturing sector, including the automotive industry.

• Credit Tightening: Financial institutions have become more selective in granting auto loans to mitigate the risk of non-performing loans. This tightening of credit has further dampened consumer purchasing power and, consequently, car sales.

• Production Declines: The first half of 2024 saw a 17.3% year-on-year drop in total car production, amounting to 761,240 units. This includes 245,047 units for domestic sales and 516,183 units for export. In June alone, car manufacturing plunged by 20.1% year-on-year to 116,289 units.

Impact on Different Segments

The reduction in the production target has varied impacts across different segments of the automotive market:

- Pickup Trucks: The production of pickup trucks has been particularly hard hit, with a 45.9% decrease in April 2024 compared to the previous year. This segment's sales have been significantly affected by the tightening of credit and weak economic conditions.

- Passenger Cars: While the passenger car segment has also seen a decline, the drop has been relatively less severe at 5% in April 2024. However, the overall trend remains negative.

- Electric Vehicles (EVs): Despite the downturn in traditional car sales, the domestic battery electric vehicle market has shown resilience, with sales increasing by 6.9% year-on-year to 33,508 units in the first half of 2024. EVs now make up 10.8% of total car sales in Thailand.

Future Outlook

The FTI has indicated that it will continue to monitor economic conditions over the next few months before making any further adjustments to the production target. Surapong Paisitpatanapong, vice-chairman of the FTI and spokesman for its Automotive Industry Club, expressed hope that state budget spending, approved in March, will help bolster the economy and potentially improve the outlook for car sales.

Additionally, there are calls for the government to introduce new stimulus measures to support economic growth and, by extension, the automotive industry. The FTI remains cautiously optimistic that these measures, coupled with a potential economic recovery, could help stabilize the situation.

Thailand's decision to cut its car production target for 2024 underscores the significant challenges facing its automotive industry. With high household debt, stringent credit conditions, and a sluggish economy, the sector is navigating a complex landscape. However, the growth in electric vehicle sales offers a glimmer of hope, suggesting that the market is gradually adapting to new trends and consumer preferences.