Sales of new vehicles in southeast Asia's six largest markets combined turned negative in the second quarter of 2019, by 2.4% to 833,515 units from 854,343 units in the same quarter of last year, according to data collected by www.AsiaMotorBusiness.com from local industry sources including vehicle manufacturers, trade associations and government departments.
This was the first quarterly decline since early 2016 and mainly reflects a fall in sales in Indonesia, the region's largest market until last year. Thailand was unable to entirely offset this sharp decline, with growth here also slowing sharply in the second quarter. Malaysia and Singapore also reported declines in the second quarter, while the Philippines and Vietnam continued to recover from weak year-earlier sales when new regulations and taxes adversely affected these markets.
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ASEAN vehicle sales in the first half of the year were just 0.3% lower at 1,686,898 units from 1,691,824 units a year earlier, thanks to moderate growth in the first quarter.
There is growing concern in the region over the effects of the trade war between the USA and China, and of the spill-over into the rest of the region. The ASEAN region has already seen exports weaken significantly this year and investment has also slowed in most markets. Some central banks have begun to cut interest rates to help shore-up domestic demand, while others have signalled their intention to do so in the second half of the year – as concerns about US dollar strength begin to subside.
The second half of the year is likely to be similar to the first half, with regional demand continuing to be affected by rising global economic uncertainty which has already undermined consumer and business sentiment across the region. It may take a while before lower interest rates have a positive impact on these markets.
The market for new vehicles in the Philippines continued its slow recovery in the second quarter of 2019, with sales rising by 3.8% to 96,452 units from 92,932 units a year earlier. This includes data from members of the main local industry associations as well as separate data from Hyundai Motor. First-half sales rose by 2.1% to 191,789 units from 187,816 units in the same period of last year, when the introduction of a new tax system in the country resulted in higher vehicle excise taxes.
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By GlobalDataThe local automotive industry is becoming increasingly optimistic that the market has turned a corner from last year's decline, despite a sharp slowdown in GDP growth to 5.8% in the first quarter of 2019 from 6.3% in the previous quarter – reflecting weaker government spending, investment and export growth. While household spending strengthened in the first quarter, the Philippine central Bank cut its benchmark interest rate by 25 basis points to 4.5% in March and signalled it was prepared to make additional cuts later in the year if required.
Vietnam's vehicle market continued to recover in the second quarter, with sales rising by over 12% to 72,514 units from weak year-earlier sales of 64,571 units. Sales in the first half of the year were more than 18% higher at 145,811 units from 123,112 units in the same period of last year, when sales were affected by the introduction of new import regulations. The Vietnamese economy remains strong, with GDP growth estimated at 6.8% in the first half of the year.
Thailand
New vehicle sales in Thailand increased by 3.3% to 260,221 units in the second quarter of 2019 from 252,025 units a year earlier, according to wholesale data compiled by the Federation of Thai Industries (FTI).
This was much lower than the 11% growth seen in the first quarter, albeit compared with increasingly strong year-earlier volumes, with sales in June falling for the first time since early 2017. The market expanded by almost 20% to 1,041,739 units last year, driven by strong domestic economic growth of 4.1%, rising household incomes and low interest rates.
Vehicle sales in the first half of 2019 were up by 7.1% at 523,770 units from 489,118 units in the same period of last year, underpinned by strong sales of pickup-based vehicles –which increased by 8.8% to 258,375 units. Passenger car sales increased by 8.5% to 206,540 units in this period, while SUV sales were 7.4% lower at 36,160 units.
Economic growth has slowed sharply this year, with first-quarter growth falling to a four-year low of 2.8%, reflecting weaker domestic consumption and investment growth and declining exports. This is attributed in part to the ongoing trade war between the USA and China, with consumer and business sentiment beginning to be affected by the economic uncertainty.
Bank of Thailand left its benchmark interest unchanged at 1.75% at its June meeting, saying the rate is sufficiently accommodating for current economic conditions, but may be forced into action later in the year.
The Federation expects the vehicle market to be slightly weaker in the second half of 2019, with full-year sales rising by just 2.5% to 1.05 million units this year. Toyota forecasts full-year sales of 1 million units this year, with more stringent lending standards expected to impact sales in the second half of the year.
Indonesia
New vehicle sales in Indonesia continued to decline sharply in the second quarter of 2019, by 14.3% to 227,714 units from 265,853 units in the same period of last year, according to wholesale data compiled by industry association Gaikindo.
This follows an almost 12% market decline in the first quarter, resulting in a 13% fall in first-half sales to 481,577 units from 553,773 units a year earlier. It also means that Thailand has once again overtaken Indonesia as the ASEAN region's largest vehicle market, a status it enjoyed prior to 2013.
The Indonesian vehicle market in the first half of this year was led lower by the commercial vehicle segment, which declined by close to 17% after two years of very strong growth, while passenger vehicle sales were weaker by an estimated 12%.
Economic growth has remained within a narrow range at just over 5% in the last few years, despite substantial infrastructure investment in the country and higher government spending. This was also the case in the first quarter of 2019, with GDP growth of 5.07%, underpinned by government spending, while a 2.1% drop in exports was more than offset by a much sharper decline in imports.
The automotive industry has blamed uncertainty in the lead up to the presidential and parliamentary elections held in April as one of the reasons for this year's sales decline. The market posted its first monthly rise of the year in June, albeit of just 1.2% and after five months of sharp declines.
Bank Indonesia cut its benchmark interest rate by 25 basis points to 5.75% in July as it looks to stimulate household consumption, which expanded by just 5% in the first quarter, and more rate cuts may follow before the end of the year.
Gaikindo this year also brought forward its annual motor show into July in the hope of stimulating vehicle purchases, although there was little in the way of major new model launches to drive the market forward in the second half of the year. The association still expects only a moderate sales decline this year to 1.1 million units.
Malaysia
Malaysia's new vehicle market declined by just 0.7% to 153,270 units in what was a very volatile second quarter, from 154,409 units a year earlier, according to registration data released by the Malaysian Automotive Association (MAA).
A 41% sales rise in May, offset by a 34% decline in June, has been largely attributed to a jump in vehicle purchases ahead of the annual Hari Raya holidays, which move forward by a month each year. Total vehicle sales in the first half of the year were 2.3% higher at 296,334 units from 289,599 units a year earlier.
Sales of passenger vehicles increased by 3.8% to 270,875 units in the six-month period, helped by the launch of new SUV models at the end of last year by the two main national car companies Proton and Perodua. Commercial vehicle sales fell by more than 11% to 25,459 units, however, reflecting weak business confidence amid declining international trade.
Economic growth in the country continued to slow in the first quarter of the year, to 4.5% year-on-year from 4.8% in 2018 and 5.8% in 2017. Private consumption continued to drive the economy forward, albeit at a slightly slower pace than in the previous quarter, while government spending accelerated. Exports were flat year-on-year in the quarter, while fixed investment contracted.
The central bank cut its benchmark interest rate by 25 basis points to 3.0% in June to help lift consumer and business confidence and stimulate private consumption.
