The automotive market in Thailand is experiencing a significant downturn due to the stricter criteria for auto loans, resulting in a notable impact on car sales. Here are the main consequences:

Decline in Vehicle Sales

• Overall Sales Drop: Vehicle sales in Thailand experienced a sharp decline, with a 24% year-on-year drop in the first four months of 2024. This is a substantial decrease from the previous year, reflecting the negative impact of stricter loan requirements.

• Pickup Trucks Hit Hard: The pickup truck segment, which is a significant part of the Thai automotive market, has been particularly affected. Sales of pickups plunged by 42.2% in the first four months of 2024, largely due to a high rate of loan rejections.

Impact on Loan Approvals

• High Rejection Rates: Financial institutions have tightened their lending criteria in response to rising household debt, leading to a high rejection rate for auto loan applications. This has been especially pronounced in the pickup truck segment, where the rejection rate is believed to be between 30-40%.

• Non-Performing Loans (NPLs): The National Credit Bureau reported a 15% increase in non-performing loans year-on-year during the first four months of 2024, driven by defaults on automobile and home loans. This has reinforced the cautious approach of banks in granting new auto loans.

Economic and Market Factors

• High Household Debt: Thailand's household debt levels are high, estimated at over 90% of GDP. This has prompted financial institutions to adopt stricter lending policies to mitigate risks associated with bad debt.

• Economic Slowdown: Slowing economic growth has further dampened consumer purchasing power. GDP growth slowed to 1.5% year-on-year in the first quarter of 2024, down from 1.7% in the previous quarter, leading to a downward revision of the full-year growth forecast to 2.8%.

Segment-Specific Impacts

• Commercial Vehicles: The commercial vehicle segment, including pickup trucks, has been heavily impacted by the stricter loan criteria. The decline in sales of these vehicles has been a major factor in the overall contraction of the automotive market.

• Electric Vehicles (EVs): While the EV segment is still expected to grow, the pace of adoption has been hindered by stricter loan requirements and reduced consumer incentives. Dealers are facing challenges with unsold inventory, although the overall EV market is projected to see a 34.9% increase in sales due to falling prices and increased local production.

Broader Industry Effects

• Production and Exports: Car production in Thailand has also been affected, with a 12.46% year-on-year decrease in January 2024. The export of vehicles has remained relatively stable, but domestic sales have seen a significant decline, impacting the overall manufacturing targets for the year.

• Used Car Market: The used car market is struggling as well, with dealerships facing lower sales and having to cut costs significantly. Stricter loan conditions have made it difficult for many buyers to secure financing, further depressing sales in this segment.

Stricter auto loan criteria are having a profound impact on car sales in Thailand, exacerbating the challenges posed by high household debt and a slowing economy. The pickup truck segment is particularly affected, but the entire automotive market, including new and used vehicles, is feeling the strain.