Sales of new vehicles in southeast Asia’s six largest markets combined continued to weaken in the third quarter of 2019, with sales falling by 6.3% to 851,820 units from 908,913 units sold in the same period of last year. This follows a negative second quarter for the market and brings the nine-month year-to-date total to 2,538,718 units – 2.4% lower than the 2,600,737 units sold in the same period of last year.
Economic growth has slowed sharply in most of the markets in the region this year, forcing some central banks into aggressive monetary loosening. Exports have either declined or slowed sharply, while rising economic uncertainty has held back investment in the region. The only economy that has continued to perform strongly is Vietnam.
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The vehicle market in Thailand turned negative in the third quarter, with volumes declining by 7.5% to 238,077 units after strong growth in the last two years. Economic growth has slowed sharply in the country this year, while tighter lending by banks has also affected sales. Indonesia was the worst-performing market in the region this year, with sales falling by 10% to 272,377 units year-to-date. Sales in Malaysia were also sharply lower in the third quarter, resulting in a 2.6% drop in nine-month sales to 442,991 units.
Local associations across the region have cut their full-year forecasts following the negative third-quarter data, with the region expected to post its first full-year sales decline since 2009.
The market for new vehicles in the Philippines continued its slow recovery in the third quarter of 2019, albeit with sales rising by just 1.2% to 100,337 units from 99,126 units a year earlier after growing by 2.1% in the first half of the year. This includes data from members of the main local industry associations and also separate data from Hyundai Motor. Sales in the first nine months of the 2019 were up by just 1.8% at 292,126 units.
The market is still recovering from last year’s excise tax hikes, although progress has been held back by slowing GDP growth – which fell to 5.5% year-on-year in the second quarter from 5.6% in the first quarter and 6.2% in the whole of 2018. This mainly reflects slowing private consumption and government spending, and declining fixed investment. The Philippine central bank in September cut its benchmark interest rate by 25 basis points for the third time this year to help stimulate domestic consumption.
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By GlobalDataVietnam’s vehicle market recovery continued in the third quarter, with sales rising by 15.9% year-on-year to 73,394 units from 63,303 units after growing by more than 18% to 145,811 units in the first half of the year. At the beginning of last year the government introduced new regulations which significantly affected vehicle imports. Sales in the first nine months of the 2019 were up by 18% at 19,205 units. Economic growth is estimated to have accelerated to 7.3% year-on-year in the third quarter of 2019 from 6.7% in the second quarter, driven by strong manufacturing and investment growth.
Thailand
Thailand’s new vehicle market deteriorated sharply in the third quarter of 2019, with sales falling by 7.5% to 238,077 units from 257,466 units in the same period of last year according to wholesale data compiled by the Federation of Thai Industries (FTI).
This follows a 7.1% rise in the first half of the year, resulting in just a 2% sales increase to 761,847 units in the first nine months of the year from 746,584 units a year earlier – driven higher by a 5.0% rise in passenger car sales to 305,647 units while SUV sales fell by 13.3% to 52,535 units. Sales of pickup-based vehicles increased by just 1.3% to 365,082 units in this period, while sales of other commercial vehicles increased by 12.1% to 38,585 units.
The vehicle market had expanded strongly in the previous two years, including an almost 20% rise to 1,041,739 units last year – driven by strong domestic economic growth of 4.1%, rising household incomes and low interest rates. GDP growth has since slowed sharply, to 2.8% year-on-year in the first quarter of 2019 and 2.3% in the second quarter, reflecting a sharp slowdown in domestic consumption and investment, and declining exports.
The FTI also pointed to stricter car-loan criteria introduced by banks earlier this year, which has resulted in a significant rise in loan rejections, as one of the key reasons for the recent market weakness. Buyers of small cars, including first-time buyers, have been hit particularly hard.
Bank of Thailand cut its benchmark rate by 25 basis points to 1.5% in August to help stimulate domestic demand and also to slow the rise of the baht, which it says is affecting export demand, and may be forced to make further cuts before the end of the year.
With vehicle sales falling by the more than 14% sales in September, the Federation lowered its full-year market forecast to 1 million units from its previous forecast of 1.05 million units. Toyota has been forecasting the market to fall to 1 million units since much earlier in the year, citing stricter lending criteria to have a significant impact on sales in the second half of the year.
Indonesia
Indonesia’s new vehicle market continued to decline in the third quarter of 2019, with sales falling by 10% to 272,377 units from 302,666 units in the same period of last year, according to wholesale data compiled by industry association Gaikindo.
This was just a slight improvement on the 13% decline in the first half of the year and reflects an almost flat performance in September, resulting in a 12% fall in cumulative nine-month sales to 753,954 units – making it the worst performing automotive market in the ASEAN region this year. Sales of light passenger vehicles declined by 11.2% to 579,031 units in this period, while commercial vehicle sales fell by 14.5% to 174,923 units.
Economic growth in the country has remained sluggish this year, with first-half GDP growth at around 5.1% – reflecting slowing investment growth and declining exports. The parliamentary and presidential elections held earlier this year have been an additional source of uncertainty for investors. Bank Indonesia reversed last year’s tightening policy, which was designed mainly to defend the rupiah, with four 25 basis point cuts in the last four months to 5.0% help stimulate domestic consumption.
Toyota’s sales declined by 8.6% to 244,430 in the nine-month period; followed by Daihatsu with a 9.8% fall to 132,998 units; Honda 97,321 units (-17.3%); Mitsubishi Motors 91,743 units (-18.6%); and Suzuki 71,469 units (-21.5%).
At the end of the second quarter the association was still expecting only a moderate sales decline this year to 1.1 million units, but these forecasts are likely revised downwards in light of the weak third-quarter data. The inauguration last week of president Joko Widodo for a second term in office and the formation of a new cabinet may remove some of the uncertainty for investors, but wider global economic uncertainty remains.
Malaysia
Malaysia’s new vehicle market declined over 11% to 146,657 units in the third quarter compared with strong year-earlier sales of 165,256 units, according to registration data released by the Malaysian Automotive Association (MAA).
This follows a 2.3% rise in the first half of the year, resulting in a 2.6% sales decline in the first nine months of the year to 442,991 units from 454,855 units a year earlier. Passenger vehicle sales were down just slightly at 404,119 units in this period while commercial vehicle sales plunged by over 22% at 38,872 units.
The vehicle market this year has been lifted by strong demand for new SUV models launched by Proton and Perodua at the end of last year, but the market struggled in the third quarter against strong year-earlier data – when demand was lifted by a three-month sales tax holiday introduced at the beginning of June 2018. Sales rebounded in September as year-earlier comparisons got easier and are expected to remain reasonably buoyant in the fourth quarter of 2019.
Economic growth is estimated to have slowed in the third quarter on weak manufacturing and export activity, while domestic consumption growth slowed as it came up against strong year-earlier data. GDP growth had begun to gain momentum in the second quarter, to 4.9% year-on-year in the second quarter from 4.5% in the first quarter and an average of 4.75% in the whole of 2018.
The central bank has left its benchmark interest rate unchanged at 3.0% since a 25 basis points cut in June, in the belief that consumer and business confidence is strong enough and that domestic spending will recover in the fourth quarter.
