The Thai vehicle market declined sharply in March 2007, by over 15% year-on-year to 56,021 units.

It was the third monthly decline for the market, bringing sales for the first quarter to 138,270 units - 18.7% lower than in the first quarter of 2006.

The domestic economy has been hit by a gradual decline in consumer and business confidence following the military coup last September. Of particular concern has been a lack of clarity in the new regime's policies regarding foreign investment and ownership. Sentiment has also been hurt by a marked escalation in separatist violence in the Muslim-majority south.

High fuel prices and inflation have also reduced consumer purchasing power in the last two years, while the vehicle market itself has looked somewhat saturated after several years of strong sales.

Sales fell virtually in all segment of the vehicle market last month, with the all-important pickup truck sector falling by 17%. Sales of passenger cars fell by 14.7% despite the launch of new models, including the Toyota Vios [a sedan version of the Yaris hatchback] - one of the best selling cars in this market.

Despite the decline, Toyota Motor Thailand remains optimistic about the market in the short term and expects a rebound in the second quarter. The company picked up some 13,360 orders for its vehicles during the 10-day motor show in Bangkok which ended on 8 April.

The company also hopes that buyers had been holding back in the first quarter in anticipation of the motor show and that the new Vios and Rush compact SUV will help stimulate sales in the coming months.

Earlier this year, Toyota had forecast domestic sales would increase to 700,000 units this year, compared with 682,500 units in 2006. This target looks increasingly tenuous. The Bank of Thailand moved to ease the pressure on the economy with a 50 basis-point cut in the overnight lending rate to 4% earlier this month, but it may take some time for confidence to return.

Democratic elections, promised in the autumn, may be the catalyst for an improvement in sentiment.

Tony Pugliese