New vehicle sales in the ASEAN region’s top six markets declined by 22.7% to just over 400,000 units in the first quarter of 2009, from 518,000 units in the same period of 2008. All six markets shrank during the quarter, the worst being Thailand – normally the largest in the region, which declined by over 33% to 107,000 units.
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A more moderate decline in sales in Malaysia, of 9.2% to 118,000 units, allowed its vehicle market to overtake both Indonesia and Thailand to become the largest in the ASEAN region for the first time since the Asian financial crisis a decade ago. Indonesia reported a 26% drop in first-quarter sales to just over 100,000 units.
Among the smaller markets, Vietnam reported the sharpest decline, of 36% to just under 22,000 units, although here demand patterns here are often distorted by substantial changes in taxation. More moderate declines were reported in the Philippines and Singapore.
The economies of the ASEAN are mainly struggling with lower demand for exports and weak commodity prices. The region’s domestic economies on the whole have remained reasonably resilient so far, but could weaken further. To help maintain domestic market demand momentum, governments have reduced interest rates and introduced stimulus measures.
Regional vehicle sales are expected to remain sluggish this year, with consumer and business caution prevailing until the outlook for the global economy improves. Regional sales are likely to drop to around 2006 levels this year, followed by a moderate recovery in 2009.
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By GlobalDataThailand
Vehicle sales in Thailand declined by 33.4% in the first quarter of 2009 to 107,774, as plummeting consumer and business confidence continued to impact the market. March was the tenth consecutive month of year-on-year decline for the market, with sales falling by 37.8% to 41,328 units.
Hardest hit has been the commercial vehicle segment and the all-important pickup truck sales in particular – which saw volumes drop by close to 45% year-on-year in March to 21,610 units. Passenger car sales faired better on a relative basis, but were still 23.4% down year-on-year at 16,194 units.
The economy is suffering from deep political unrest, the latest episode of which culminated in a state of emergency being declared in Bangkok this month after demonstrators forced the cancellation of this year’s ASEAN summit held in nearby Pattaya. The country remains extremely divided politically, with the two main parties refusing to accept the legitimacy of the other to form a government.
As a result, the all-important tourism sector is being hurt, as is overall domestic sentiment. Important business decisions are being postponed, investment is falling and unemployment is rising.
Meanwhile, exports have also been hit by a sharp decline in key overseas markets, particularly Europe and the USA, and factories have been put on shortened working hours and extended closures. GDP growth forecasts for the year have been revised progressively downwards, with the government now expecting a contraction of between 3-5% this year after growth of around 4% in 2008.
To help shore up the economy, the Bank of Thailand cut its benchmark interest rate for the fourth time in five months in April, to 1.25% (from 3.75% in December) and the government is looking to speed up the dispersal of the THB 155 billion stimulus budget.
While the vehicle market may enjoy a short-term lift from the Bangkok Motor Show held at the beginning of April, sales are clearly heading for a fourth straight year of decline. The industry expects a drop to below 500,000 units for this year. It will take some time before confidence improves and the feel-good factor returns to Thailand.
Malaysia
Vehicle sales in Malaysia declined by 9.2% in the first quarter of 2009 to 118,681 units, from 130,774 units a year earlier, as consumers continued to retrench in the face of slowing economic activity. Sales in March were just 4.8% lower, however, as loan approval rates increased with banks easing lending criteria.
The Malaysian national bank has reduced interest rates on three occasions since November to 2%, after it released its latest economic forecasts. Bank Negara now expects full-year GDP growth to be between -1% and 1% due to a decline in industrial output and exports. With inflation at around 2%, interest rates could be reduced further to help stimulate domestic demand.
Sluggish demand is expected to continue for the rest of the year, with the Malaysian Automotive Association (MAA) predicting sales of 480,000 units this year – around 12% lower than last year’s 548,000 units. This assumes that demand will remain at current levels or lower for the rest of the year.
Indonesia
The Indonesian vehicle market declined by almost 26% to 100,260 units in the first quarter of 2009 compared with 135,387 units a year earlier, according to data released by Gaikindo – the industry association. The sharp decline comes after a year of record sales and reflects tightening credit markets as banks become increasingly cautious in their lending.
Economic growth has slowed significantly since growing by 6% last year, with Bank Indonesia estimating first-quarter 2009 GDP growth at 4.6%. The government expects full-year GDP growth to be around 4%, rising to 5% in 2010.
Corporate revenues have been severely hit by falling commodity prices and lower output volumes. Domestic consumers have turned more cautious, while exports are estimated to have dropped by 30-35% in January and February and are expected to fall 25-30% in the full-year.
The government is banking on resilience in domestic private consumption to keep the economy afloat this year. Most investment will be generated domestically, helped by the government’s $6.5 billion stimulus package announced earlier in the year. Election spending will also help. Interest rates have been cut to 7.5%, a level seen as pro-growth for this economy in recent years.
Gaikindo expects the vehicle market to contract by 30% this year to around 425,000 units, as consumers and companies prioritise expenditure, resulting in delayed vehicle purchases. Credit has eased in the last month or two, but remains tight.
Tony Pugliese
Vehicle sales in the ASEAN by market, 2004-08
| 2005 | 2006 | 2007 | 2008 | 1-3 2008 | 1-3 2009 |
Indonesia | 533,910 | 317,312 | 434,499 | 607,799 | 135,387 | 100,260 |
Malaysia | 552,316 | 490,768 | 487,176 | 548,115 | 130,774 | 118,681 |
Philippines | 97,063 | 99,541 | 117,903 | 124,449 | 28,907 | 28,564 |
Singapore | 124,922 | 132,981 | 119,215 | 108,478 | 27,176 | 23,553 |
Thailand | 703,432 | 682,500 | 631,250 | 615,270 | 161,736 | 107,774 |
Vietnam | 39,876 | 40,823 | 80,392 | 110,186 | 34,095 | 21,839 |
Total | 2,051,519 | 1,763,925 | 1,870,435 | 2,114,297 | 518,075 | 400,671 |
Source: Industry sources.
