Recovery in Indonesia and Thailand continues

Q3 was a bright quarter for ASEAN region vehicle sales

Q3 was a bright quarter for ASEAN region vehicle sales

New vehicle sales in southeast Asia's six largest markets rose by 5.6% to 774,303 units in the third quarter of 2016, from 733,108 units in the same period of last year, according to data collected exclusively for just-auto.

Cumulative sales in the first nine months of the year rose by 4% to 2,292,939 units, reflecting continued recovery in the region's two largest markets – Indonesia and Thailand, and ongoing strong growth in the smaller markets.

The data do not include some import sales in Vietnam and the Philippines which are not included in the main trade associations' statistical reports.

The region's largest vehicle market, Indonesia, continue to grow in the third quarter - resulting in a 2.4% rise in the nine-month sales to 783,100 units. GDP growth has picked up moderately in recent months, helped by aggressive monetary loosening by Bank Indonesia and new model launches by key vehicle manufacturers.

Sales in Thailand expanded by 3% in the third quarter, helping the market turn marginally positive over the nine-month period – by 0.5% to 556,400 units. Here too domestic economic growth has strengthened and while the vehicle market's medium-term prospects are good, uncertainty in the short-term has increased.

By contrast, Malaysia's new vehicle market continued to decline in the third quarter, by over 12% - resulting in an almost 14% drop in nine-month sales to 418,433 units. The market is coming off eight years of almost uninterrupted growth and was always going struggle in a slower economic growth environment.

The region's smaller markets continued to perform strongly, driven by continued strong domestic economic growth. Sales in the Philippines rose by close to 27% in the first nine months of the year, while sales in Vietnam were up by more than a third higher in the same period. In both these markets, low interest rates and continued strong investment continue to drive domestic consumption.

New vehicle sales in Singapore continued to enjoy a strong cyclical rebound after many years of decline, with sales jumping by more than 60% over the nine-month period driven by sharply lower registration taxes.

Indonesia

Indonesia's new vehicle market continued to recover in the third quarter, with sales increasing by 6.4% to 251,200 units from a weak 236,200 units a year earlier, according to data compiled by local industry association Gaikindo.

After a negative start to the year, the market began to recover in the second quarter and looks likely to achieve its first full-year growth following two years of decline. Cumulative nine-month sales came in at 783,100 units, 2.4% higher than in the same period of last year.

The market has responded to a series of interest rate cuts by the central bank and to new models introduced by the country's leading vehicle manufacturers. Toyota replaced key models in the second half of last year, including the Fortuner full-size SUV and the Innova and Avanza MPVs.

In the third quarter of this year Toyota introduced a compact MPV, the Sienta, as well as a 7-seater variant of its low-cost green car (LCGC) – the Cayla. In the last year Daihatsu also replaced its popular Xenia MPV and introduced the Sigra - its version of the seven-seater LCGC.

Overall economic growth has picked up moderately from lows of around 4.7% in late 2015/early 2016, to just over 5% in the second and third quarters of 2016 - helped by strengthening domestic consumption. Bank Indonesia's latest interest rate cut this month brings its benchmark rate to 4.75%, from 7.75% at the beginning of the year.

Gaikindo expects full-year vehicle sales to come in at between 1.05-1.08 million units, around 4-6% higher than last year's 1.13 million units.

Thailand

New vehicle sales in Thailand expanded by 3% to just over 190,000 units in the third quarter, from 184,500 units a year earlier, based on data collected by the Federation of Thai Industries.

This is the second straight quarterly expansion since the market went into decline in the second half of 2013. The market peaked at 1.44 million units in 2012, helped by first-time buyer incentives from the government.

Sales in the first nine months of the year were 0.5% higher at 556,400 units, compared with 553,600 units a year earlier, driven higher mostly by rising demand for passenger cars and pickup-based vehicles.

GDP growth accelerated to 3.5% year-on-year in the second quarter, from 3.2% in the first quarter, with strong private consumption offsetting slowing growth in government spending, investment and exports. The country's tourism sector was one of the country's main economic bright-spots – thanks to strong growth in arrivals from China.

Third-quarter GDP data is not yet available, but drought conditions and continued weak export demand are expected to have held back economic growth in the last few months.

Consumer confidence weakened in the third quarter and sentiment since then has been affected further by the loss of King Bhumibol Adulyadej earlier this month. Bank of Thailand's has left its benchmark interest rate unchanged at a historic low of 1.5% since 2015, but it could loosen its policy if domestic consumption drops significantly below current levels.

The outlook for the domestic vehicle market is good, with the five-year lock-in period for first-time vehicle buyer tax rebates coming to an end, but economic uncertainty has increased in the short term.

Malaysia

Malaysia's new vehicle market continued to decline sharply in the third quarter of 2016, by 12.4% to 142,974 units from 163,235 units in the same period of last year, according to data released by the Malaysian Automotive Association (MAA).

Sales in the first nine months of the year were almost 14% lower at 418,433 units. The market is coming off eight years of strong, almost uninterrupted growth - peaking at close to 667,000 units last year.

GDP growth slowed to 4% in the second quarter, from 4.2% in the first quarter and from 5% in the whole of 2015. Weak export growth, of 1% year-on-year in the second quarter, offset a rebound in private and public consumption and investment.

Private consumption expanded by 6.3%, supported by continued wage and employment growth. The central bank left its benchmark interest rate unchanged at 3.0% after a 25 basis point cut in June.

Public sector consumption expanded by 6.5% during the quarter, while gross fixed capital formation increased by 6.1% from 0.1% growth in the first quarter.

The MAA has revised down dramatically its full-year market forecast. It now expects total vehicle sales to decline by 13% to 580,000 units this year, compared with its previous forecast of 650,000 units.

ASEAN vehicle sales by major market

2013201420151-9 20151-9 2016% ch
Indonesia 1,229,9011,208,0191,013,300764,700783,1002.4
Thailand 1,325,079881,832799,592553,600556,4000.5
Malaysia 655,793666,465666,674485,489418,433-13.8
Philippines 212,682270,372317,000206,284261,37026.7
Vietnam 96,692133,588208,568144,671192,95133.4
Singapore 27,37442,98074,54450,29580,68560.4
Total3,547,5213,203,2563,079,6782,205,0392,292,9394