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May 15, 2020

ASEAN sales sharply lower in Q1

Sales of new vehicles in southeast Asia’s six largest markets combined are estimated to have declined by over 19% to 700,528 units in the first quarter of 2020 from 865,532 units in the same period of last year, according to data collected exclusively for just-auto from local industry sources including vehicle manufacturers, trade associations and government departments.

By bcusack

Sales of new vehicles in southeast Asia's six largest markets combined are estimated to have declined by over 19% to 700,528 units in the first quarter of 2020 from 865,532 units in the same period of last year, according to data collected exclusively for just-auto from local industry sources including vehicle manufacturers, trade associations and government departments.

Regional vehicle sales had already turned negative in the second half of 2019, with GDP growth slowing significantly in several countries due to weak or declining exports, slowing investment and falling consumer and business sentiment. This negative trend continued in the first two months of 2020, before a new, much bigger problem emerged in the form of the COVID19 coronavirus.

The ASEAN vehicle market largely shrugged off the threat of COVID19 in the first two months of the year. Governments in the region were initially sceptical about the seriousness of the pandemic and were torn between supporting economic growth and prioritising public health. Most countries only introduced significant social distancing and lockdown policies half-way through March. By the end of February, only a few key economic sectors had been directly affected by the pandemic, including international travel and tourism and export-dependent businesses.

As the COVID19 crisis unfolded, central banks across the region stepped up interest rate cuts and eased lending and capital adequacy standards for local banks to help maintain liquidity. Governments have also provided additional fiscal support, including tax cuts, soft loans and direct funding to help cushion the impact of the crisis on companies and households.

Millions across the region have already lost their jobs, however, and many thousands of companies have either frozen their operations or gone bankrupt. Economists expect the COVID pandemic to cause the worst economic downturn since the 1998 Asia financial crisis. The worst of the crisis is expected to be in the second quarter of 2020, before economic lockdowns begin to be eased in May and June. By then, significant economic damage will have already taken place.

Vehicle sales in Indonesia had begun to stabilise in early 2020 after declining by over 10% in 2019, supported by a series of interest rate cuts by the central bank during the year to help offset already sluggish economic growth. The government introduced a partial economic lockdown in mid-March to help slow the spread of COVID19, which resulted in a 15% sales decline that month. First-quarter sales were just 6.7% lower at 236,825 units, however, but much sharper declines are expected in subsequent quarters.

The Thai vehicle market had already turned negative in the second half of 2019 after two years of strong growth, with the decline accelerating in the first quarter of 2020 as domestic sentiment turned bearish and with a strict economic lockdown ultimately bringing most market activity to a halt. Overall vehicle sales declined by more than 24% to 200,064 units in the first quarter, with March sales plunging by 42% year-on-year to 60,105 units.

Malaysia was one of the worst-performing markets in the region in the first quarter, with sales falling by over 26% to 105,553 units and plunging by almost 59% to 22,478 units in March.

The Philippine vehicle market is estimated to have declined by over 16% to 90,438 units in the first quarter of 2020, with the seriousness of the COVID19 pandemic becoming evident only in March. The government began to impose strict lockdowns in the country's most populous regions in mid-March, so like in Indonesia the full effects of the health crisis on the vehicle market will only become apparent in the April data.

The economic lockdown in the Philippines is currently scheduled to stay in place until mid-May, but with COVID19-related deaths and new infections continuing to rise sharply, the lockdown will likely be extended unless the situation begins to improve soon.

Vietnam was the worst performing vehicle market in the region in the first quarter, with sales estimated to have declined by almost 32% to 50,009 units. This is mainly due to the early action taken by the Vietnamese government, in early February, to try to contain the virus despite very few infections reported at the time.

According to the World Health Organisation (WHO), Vietnam has recorded just 271 COVID19 infections to-date and no related deaths and its vehicle market is expected to be one of the first in the region to recover from the crisis.

Indonesia

New vehicle sales in Indonesia declined by just 6.7% to 236,825 units in the first quarter of 2020 from already weak year-earlier sales of 253,863 units, according to member wholesale data compiled by industry association Gaikindo, with the full effects of the COVID19 coronavirus felt only in the second half of March.

The Indonesian government was initially sceptical about the seriousness of the pandemic and was torn between supporting economic growth and prioritising public health. But in mid-March it took more concrete action to help slow the spread of the coronavirus in the country, with a partial lockdown introduced on 18th March. Only essential business sectors such as food, healthcare, banking, utilities and transportation, have been allowed to operate since in most of the country, including the capital city Jakarta.

Both domestic and international travel has been severely restricted and companies operating in non-essential sectors have been urged to cease activities unless staff can work remotely. Millions have already lost their jobs, leaving many households without significant income and increasing the risk of social unrest.

The government introduced a number of fiscal and poverty alleviation policies to help mitigate the effects of the pandemic, but their impact has been limited. Bank Indonesia has cut its benchmark interest rate by 25 basis points in both February and March, to 4.50%. It also lowered its reserve requirement of local banks to help provide additional liquidity to the economy.

First-quarter sales of passenger vehicles fell by just 4.5% to 183,638 units, with sales still underpinned by increasingly attractive finance packages and promotional activity by dealers. Commercial vehicle sales fell by over 13% to 53,187 units in the same period. Toyota reported a 2.5% decline in wholesale volumes to 75,363 units; while Daihatsu's sales dropped by 5.1% to 48,113 units; Honda 36,218 units (+25.6%); Mitsubishi Motors 24,572 units (-30.9%); and Suzuki 24,210 units (+5.9%).

Preliminary data released this week shows first-quarter GDP growth slowed to 2.97%, from just over 5% last year. The economy has deteriorated significantly since increasingly strict lockdown measures were introduced in mid-March, with normal economic activity grinding to a halt in many parts of the country. Toyota, Suzuki and Honda suspended local production for two weeks in the second half of April to adjust to falling domestic retail demand and plunging exports, with more stoppages expected in May.

After only moderate declines reported in the first two months of the year, the Indonesian vehicle market saw volumes fall more sharply in March – by close to 15% to 76,800 units. Much steeper declines are expected from April onwards, as the full effects of the coronavirus crisis on the economy become more evident. Some economists are forecasting full-year economic growth of little more than zero, so the vehicle market is expected to continue to decline sharply throughout the rest of the year.

Thailand

Thailand's new vehicle market declined by over 24% to 200,064 units in the first quarter of 2020 from 263,549 units in the same period of last year, according to wholesale data compiled by the Federation of Thai Industries (FTI).

The global COVID19 pandemic has had a significant impact on the local vehicle market so far this year, with the decline accelerating significantly in March after the government implemented increasingly strict lockdown policies to help slow the spread of the virus. Sales in March plunged by almost 42% year-on-year to 60,105 units.

Sales of pickup-based vehicles fell by 41.8% to 30,296 units last month, while passenger car sales declined by 48.3% to 20,698 units and SUV sales were 17.0% lower at 5,756 units. Sales of commercial vehicles, excluding pickup-based vehicles, fell by 17.9% to 3,355 units.

Toyota's sales plunged by over 49% to 17,282 units in March, according to separate sources; while Isuzu's sales dropped by 21.8% to 13,629 units; Honda 7,506 units (-31.9%); Mitsubishi Motors 4,998 (-50.2%); Nissan 3,236 units (-57.7%); Mazda 3,113 units (-49.2%); and Ford 2,207 5,581 (-60.4

With all major economic indicators deeply in negative territory, the country's GDP is estimated to have shrunk in the first quarter of the year – reflecting weak exports, a sharp decline in tourism revenue and weaker overall domestic consumption. Bank of Thailand cut its benchmark interest rate to a historic low of 0.75% in February to help underpin the domestic economy.

The country's central bank at the end of March said it expected GDP to contract by 5.3% in 2020, down from its previous forecast of 2.8% growth made at the beginning of the year. The World Bank is forecasting a more moderate 3.0% economic decline this year, with exports falling by 5.5% and private consumption 1.8% lower.

Even with the COVID19 coronavirus under control in the second half of the year, most forecasters agree that the Thai economic will decline by between 2% and 5% this year. In late April, the FTI forecast vehicle production in the country will drop by 37% to 1.33 million units from over 2 million units in 2019, with the possibility of a 50% decline if the COVID19 crisis continues well into the second half of the year.

Half of the forecast production, or some 665,000 units, is expected to be absorbed by the domestic market – which would represent a more than 30% decline on the previous year. The FTI noted that global car makers such as Toyota, Honda, Mitsubishi, Ford and Mazda shut down production lines in March and April due to falling demand and also to conform with government lockdown policies.

Malaysia

Malaysia's new vehicle market declined by almost 26% to 105,553 units in the first quarter of 2020 from 143,046 units in the same period of 2019, according to registration data released by the Malaysian Automotive Association (MAA).

Consumer and business confidence in the country began to weaken significantly in February, when the seriousness of the COVID19 coronavirus threat to the world became more evident. Vehicle sales fell by almost 59% to 22,478 units in March, with the market shutting down completely after the Malaysian government issued its first movement control order (MCO) on 18th March.

Under the MCO, all personal interstate and international travel is prohibited, schools and non-essential businesses have been ordered to close and people are only allowed to leave their homes to buy food and for other essential reasons such as healthcare. The current MCO is due to expire on 12th May, although some sectors including manufacturers have been allowed to reopen this week.

The vehicle market in the first quarter was driven lower by a 27% drop in passenger vehicle sales to 96,115 units, while commercial vehicle sales fell by just over 21% to 9,418 units.

Perodua continued to lead the market in the first three months of the year, albeit with sales falling by 25.9% to 44,977 units; followed by Proton with 21,757 units (+19.0%); Honda 11,100 units (-50.0%); Toyota 10,415 units (-24.1%); Nissan 2,747 units (-46.8%); and Mazda 2,723 units (-17.8%).

With leading economic indicators such as exports and PMI turning sharply negative in February, Malaysia's GDP is now expected to shrink in the first quarter, with some banks predicting a full-year economic contraction of up to 2%.  The Malaysian central bank cut its benchmark interest rate by 25 basis points to 2.50% in March, while the government introduced additional measures to improve liquidity in the economy.

Local vehicle manufacturers have been forced to halt operations over the last two months in compliance with the government's MCO regulations, although the government this week agreed to begin relaxing restrictions on manufacturing activity in early May. Domestic demand is expected to be limited for some time, however, particularly for durable goods.

The MAA in its press release said it expects zero vehicle sales in April due to the fact the dealers have not been allowed to operate since 18th March. Local investment bank MIDF said it expects the market to decline by over 16% to a little over 500,000 units in 2020.

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