The Thai new vehicle market grew for the ninth consecutive month during September, mainly thanks to new model launches, the expiry of the five-year lock-up period for vehicles bought under the first-time car buyer scheme, and an increase in government spending.
IHS Markit perspective
- Significance: Thai new vehicle sales surged 21.9% year on year (y/y) during September to 77,592 units, with passenger vehicle sales up 14.9% y/y and commercial vehicle sales up 26.6% y/y.
- Implications: Given the strong growth so far this year, most automakers in the country have revised their targets for 2017 upwards. They intend to fight for control of the local market by bringing out new models and expanding their dealership networks.
- Outlook: IHS Markit forecasts that Thai light-vehicle sales will grow by 6.5% y/y to 772,714 units in 2017.
New vehicle sales in Thailand surged 21.9% year on year (y/y) during September to 77,592 units, according to data released by Toyota Motor Thailand, the official compiler of automotive data in the country. Passenger vehicle sales grew by 14.9% y/y during the month to 29,474 units, while commercial vehicle (CV) sales climbed 26.6% y/y to 48,118 units. For the year to date (YTD), industry sales are up 11.5% y/y at 620,709 units, with passenger vehicle sales surging 19.9% y/y to 244,621 units and CV sales up 6.7% y/y at 376,088 units.
By brand, Toyota's sales fell 6.7% y/y to 20,621 units in September, giving it a market share of 26.6%. Isuzu came second with 16,784 units (up 61.0% y/y), followed by Honda with 10,630 units (up 20.5% y/y), Mitsubishi with 5,567 units (up 25.4% y/y), and Nissan with 5,183 units (up 93.9% y/y). During the first nine months of the year, Toyota sold 165,286 units, representing a decline of 3.9% y/y. It was followed by Isuzu with 118,804 units (up 13.9% y/y), Honda with 93,271 units (up 14.4% y/y), Mitsubishi with 48,775 units (up 20.9% y/y), and Nissan with 42,604 units (up 38.2% y/y).
Outlook and implications
Within the Association of Southeast Asian Nations (ASEAN) region, Thailand is the second-largest market after Indonesia for light vehicles, including passenger vehicles and light commercial vehicles (LCVs). Thailand is set to account for 24.2% of ASEAN light-vehicle sales in 2017, according to IHS Markit's light-vehicle sales forecast data.
New vehicle sales in Thailand grew in September for the ninth consecutive month. This growth can be attributed to new model launches, the expiry of the five-year lock-up period for vehicles bought under the first-time car buyer scheme, higher commodity prices, and an increase in government spending.
In light of the strong market growth so far this year, Toyota has revised its total industry sales forecast for 2017 upwards to 830,000 units, up 3.8% from the initial target of 800,000 units. As for the Toyota brand itself, the automaker has maintained its initial sales forecast of 265,000 units, up 8.1% y/y, which would give it a market share of around 32%.
Mazda has revised its Thai sales target for 2017 upwards by 2.0% to 51,000 units. To achieve its full-year target, Mazda plans to launch two new models and other refreshed models in the fourth quarter, one of which will be the CX-5 sport utility vehicle (SUV). However, the automaker has not revealed any details about the other models. It also plans to open 20 dealerships and service centres in the country by 2019, and renovate its existing 147 dealerships and service centres. Mazda also plans to launch the new CX-8 SUV in the country in 2018. Meanwhile, Nissan expects to sell around 57,600 vehicles in Thailand during fiscal year (FY) 2017/18, reflecting an increase of 31.0% y/y. "From 2017, we will focus on our three pillars, which are extending the range of Nissan vehicles, re-engaging our 200-outlet dealer network and utilising our footprint with the Nissan regional R&D [research and development] facility in the country," said Nissan Thailand president Antoine Barthes. Automakers plan to fight for control of the local market by bringing out new models and expanding their dealership networks in the country.
IHS Markit forecasts that light-vehicle sales in the country will grow by 6.5% y/y to 772,714 units in 2017, mainly on a low base of comparison, an increase in government spending, the launch of eco-cars, and the expiry of the five-year lock-up period for vehicles. Our forecasts show that around 40 new or refreshed models will be launched in the country this year.
Eco-cars are gaining in popularity in the country. According to data released by the Federation of Thai Industries (FTI), sales of eco-cars in Thailand during the first eight months of 2017 went up by 26.4% y/y to 90,050 units. The second phase of the country's eco-car programme was announced in 2013, with the aim of manufacturing 1.58 million units. The minimum capacity for eco-car models approved in the second phase is set at 100,000 units a year within five years of production, while excise duty on an eco-car is levied at 14%, while those compatible with Euro V emission standards can enjoy a 12% rate. New phase-two eco-cars must emit no more than 100 grams (g) of carbon dioxide (CO2) per kilometre (km), down from 120 g/km for existing eco-car models. Fuel efficiency must be 4.3 litres/100 km, up from 5 litres in the first phase. Engine displacement should not exceed 1.3 litres for gasoline (petrol) models and 1.5 litres for diesel models.
Furthermore, demand in Thailand for alternative-powertrain vehicles, including electric vehicles (EVs), hybrids, and plug-in hybrid electric vehicles (PHEVs), is expected to grow in the coming years. The Thai government has announced excise tax rate changes focused on increasing the adoption of such vehicles in the country. Under the new tax structure, excise tax on EVs has been reduced from 10% to 2%. The tax rates for hybrids and plug-in hybrids have also been reduced, depending on their emission levels. For passenger cars emitting less than 100 g/km of CO2, the tax rate has been reduced from 10% to 5%; for cars emitting less than 150 g/km of CO2, the rate has been reduced from 20% to 10%. The maximum tax rate for electrified cars is 12.5% for vehicles emitting less than 200 g/km, down from 25%. The government has set tax rates for passenger pick-up vehicles with less than 175 g/km of CO2 emissions and double-cab pick-up trucks at 23% and 10%, respectively. This tax rate will be applicable until 2025. The government has also agreed to add 10 more important EV parts to the list of those that receive corporate income tax exemption for eight years. The incentives will help Thailand to remain an attractive destination for global automakers producing alternative-powertrain vehicles. The government is also setting up infrastructure to support such vehicles. It aims to have 1.2 million EVs and PHEVs on the country's roads by 2036. Thailand is also attempting to revise its free-trade agreement (FTA) with China and hopes to implement a 0% import duty on EVs. At present, a 20% import duty is charged on EVs imported from China and Japan, and an 80% duty on EVs imported from the United States. The import duty on vehicles in Thailand is fairly high unless the vehicle is covered under bilateral agreements. A reduced import tax in Thailand under the FTA would help open up the market and create demand for EVs produced by Chinese automakers.
Meanwhile, Toyota has become the first automaker to receive the Thai government's incentives for local production of alternative-powertrain vehicles. The government has approved Toyota's plan to invest THB19 billion (USD573 million) in the country to produce hybrid vehicles locally. Toyota will assemble 70,000 hybrid vehicles per year, manufacture 70,000 batteries a year for hybrid vehicles, and produce 9.1 million units of automotive components per annum, including doors, bumpers, and front/rear axles. The automaker is expected to start assembly of hybrid vehicles in the country from 2018. It has also reduced the retail prices of its hybrid vehicles in the country in accordance with the new excise tax rate by another 2–12.5%. Toyota has also partnered with Chulalongkorn University to implement Ha:mo, an ultra-compact EV sharing service, within the university's campus in Bangkok. The service is expected to start from December with 10 units of "COMS" ultra-compact EVs manufactured by Toyota Auto Body, and an additional 20 units of ultra-compact EVs will be introduced by mid-2018, taking the total number to 30. Furthermore, Isuzu also plans to bring out hybrid vehicles in the country by 2020.
We expect demand in Thailand for plug-in vehicles, including EVs and PHEVs, to grow in the coming years. We forecast that annual production of plug-in vehicles will increase to around 5,150 units in Thailand by 2020, up from 3,903 units in 2016.
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