- Markets begin to stabilise in June as lockdowns are eased
Sales of new vehicles in southeast Asia’s six largest markets combined plunged by almost 66% to 291,889 units in the second quarter of 2020 from 849,334 units in the same period of last year, according to data analysed exclusively for just-auto from local industry sources.
The Q2 decline follows a 19% decline in the first quarter, resulting in a 42% drop in first-half sales to 992,417 units from 1,714,866 units as governments across the region shut down their economies to help slow the spread of the COVID-19 virus pandemic. While restrictions still remain in place in all countries in the region, particularly affecting travel, tourism and hospitality sectors, day-to-day domestic economic activity is gradually returning to normal.
Economic growth turned negative in most countries in the region in the second quarter after slowing sharply in the first quarter. Central banks have slashed interest rates to historic lows and governments have introduced fiscal stimulus and poverty alleviation measures to help cushion the impact of the mandatory lockdowns – which have caused mass layoffs, many thousands of bankruptcies and significant consumer and business uncertainty across the region.
Countries such as Vietnam and Thailand have been more successful than others in bringing the virus under control, but all countries have suffered significant economic damage as a result of the pandemic. Export demand has also declined sharply, while weak commodity prices continue to affect incomes and investment across the region.
ASEAN’s largest vehicle market in the first half of 2020 was Thailand, where sales fell by over 37% to 328,604 units from 523,770 units in the same period of last year. While the country successfully brought the COVID19 outbreak under control early on, the economy has nevertheless been severely impacted by plunging export demand and a ban on tourism arrivals in particular.
Vehicle sales in Indonesia declined by nearly 46% year-on-year to 260,933 units in the first half of the year, while Malaysia saw its sales fall by 41% to 174,675 units.
The Philippines was the worst performing major market in the region in the first six months of the year. It is also one of the worst affected by the coronavirus pandemic and has endured among the longest economic and social lockdowns. Sales plunged by almost 52% year-on-year to 104,496 units in the first half of the year following an 87% drop to 14,058 units in the second quarter. The worst looks to be over, however, after the main automotive trade association reported a 225% month-on-month sales rebound in June – although year-on-year volumes were still down by 51%.
Vietnam reported the slowest market decline this year, with first-half sales falling by just under 30% to 102,720 units.The government has so far reported very few COVID19 infections and zero deaths, thanks to early action taken to contain the virus. With day-to-day domestic economic activity normalising early on, the country’s vehicle market is expected to be one of the first in the region to rebound from the crisis.
Thailand’s new vehicle market declined by over 37% to 328,604 units in the first half of 2020, according to data compiled by the Federation of Thai Industries, after a drop of more than 50% to 128,540 units in the second quarter – with large parts of the economy under locked down for most of this time to help control the spread of the COVID19 pandemic.
The Thai government began to ease business and social restrictions in early May, although key sectors of the economy still remain under significant pressure, particularly those dependent on travel and tourism, and exports. Private investment is also sharply lower this year, while weak commodity prices have also affected incomes. After shrinking by 1.8% year-on-year in the first-quarter, a much sharper GDP decline is expected for the second quarter before the data begins to improve.
Bank of Thailand cut its benchmark interest rate to a historic low of 0.5% in the second quarter to help stimulate the economy, which it expects will shrink by 8.1% over the full year on weak domestic and export demand. The government has introduced multiple stimulus packages to help cushion the crisis, including soft loans and tax relief for small and medium companies, cash hand-outs to redundant workers, measures to ensure liquidity in the financial sector, and funding for local infrastructure and job creation programmes.
While vehicle sales in June were still sharply lower year-on-year, they were 43% higher than in the previous month. The local automotive industry hopes that the market has already begun to stabilise, with the outlook for the second half of the year improving. The FTI cut its full-year sales forecast to between 500,000-700,000 units for 2020, depending on how quickly the economy recovers from pandemic, from 1,007,000 units in 2019.
New vehicle sales in Indonesia fell by nearly 46% year-on-year to 260,933 units in the first half of 2020 from 481,577 units in the same period of last year, according to member wholesale data compiled by industry association Gaikindo. This follows an almost 90% plunge in second-quarter sales to 24,108 units, after the government implemented a widespread social and economic lockdown in March which it only began to ease significantly in early June.
Sales of passenger vehicles fell by over 46% to 199,140 units in the first-half of the year, while commercial vehicle sales were down by 44% to 61,793 units.Toyota reported a 47.0% decline in wholesale volumes to 81,816 units in this period; followed by Daihatsu with a 42.8% drop to 49,774 units; Honda38,769 units (-34.4%); Suzuki 28,786 units (-38.2%); and Mitsubishi Motors 27,932 units (-56.8%).
Bank Indonesia estimates GDP contracted by over 4% in the second quarter as a result of the lockdown, after growing by just under 3% in the first quarter and by over 5% in 2019. It cut its benchmark interest rate by 25 basis points to 4.00% in July to help stimulate growth, the eighth consecutive rate cut since early last year. The government has also introduced a number of fiscal and poverty alleviation policies to help mitigate the effects of the pandemic, but their impact so far has been limited.
While some domestic banks expect GDP to shrink further in the third quarter, the worst looks to be over for the country’s vehicle market following extremely depressed sales volumes in April and May. Sales in June were up by 255% compared with May, after the government began to ease lockdown measures.
The outlook for the vehicle market in the second half of the year remains negative, however, with business activity still very weak and consumer and business confidence depressed. Most sectors of the economy are still operating at well below capacity, while the travel, tourism and hospitality sectors are still affected by government restrictions and export demand and private investment remains weak.
Malaysia’s new vehicle market declined by over 41% to 174,675 units in the first half of 2020 from 296,317 units in the same period of last year, according to registration data released by the Malaysian Automotive Association (MAA). Sales in the second quarter fell by 55% to 69,122 units, after the government locked down the economy under its first Movement Control Order (MCO) in mid-March to slow the spread of the COVID19 coronavirus pandemic.
Registrations of new passenger vehicles fell by 41.3% to 158,876 units in the first six months of the year, while commercial vehicle sales were down by almost 38% to 15,799 units.
The country’s GPD expanded unexpectedly in the first quarter, by 0.7% after growing by 3.6% in the fourth quarter of 2019. But domestic economic activity plummeted in the second quarter as a result of the lockdown, while export demand has also weakened significantly this year. The central bank cut its benchmark interest rate to a record low of 1.75% in July, while the government has introduced stimulus budgets and other measures to help support the economy.
Vehicle sales in June increased by almost 5% year-on-year to 44,695 units, albeit from very weak year-earlier levels, and were up by 92% month-on-month as the domestic economy continued to normalize after more than two months of lockdown. Sales were lifted by the suspension of the vehicle sales tax early in the month until the end of the year, which resulted in broad-based price cuts by dealers.
While the June sales volumes were encouraging, the recovery is unlikely to be sustained throughout the second half of the year. Consumer and business confidence remains depressed and export demand is still weak.