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November 15, 2005

EXCLUSIVE ANALYSIS: THAILAND: Vehicle sales growth slows further in October

Growth in the Thai vehicle market slowed sharply in the last two months from the double-digit rates seen in the first 10 months of the year.

Growth in the Thai vehicle market slowed sharply in the last two months from the double-digit rates seen in the first 10 months of the year.

October sales rose by 3.7% year-on-year to 57,399 units, according to data released by Toyota Motor Thailand, the slowest rate of growth in more than two years. The latest figures bring the 2005 year-to-date total to 562,134 units, although this is still 13.7% more than year earlier volumes thanks to much stronger growth earlier in the year.

The performance of the vehicle market reflects a slowdown in economy expansion this year, with high oil prices, rising interest rates and the effects of last December’s tsunami combining to take their toll on consumer spending power. The World Bank now expects full-year GDP growth to be around 4.2%, compared with 6.1% in 2004.

So far, vehicle sales growth has been driven primarily by the pick-up truck sector – and by Toyota in particular following the launch of the IMV-based Vigo model in August 2004. Overall, Toyota claimed 40% of total vehicle sales in the first 10 months of the year, with 255,051 sales – compared with 183,553 units a year earlier.

For the first time in years, Toyota has overtaken Isuzu to become the best-selling pick-up truck brand in Thailand in the first 10 months of 2005, with a market share of 38.2% and sales of 145,047 units.

Helping Toyota leapfrog Isuzu was the launch of the Fortuner pickup truck-based SUV, which replaced the outgoing Sports Rider and has breathed new life into the stagnant passenger pick up vehicle (PPV) sub-segment. Competing models will follow, including a replacement for the Mitsubishi G-Wagon – based on its new redesigned Triton pickup truck – in a year or so.

Isuzu remained a major force in the pickup sector, however, with the D-Max claiming a market share of 35% and sales of 132,917 units. The launch of the GM version of the D-Max, the Colorado, has met with reasonable success – with 20,685 sales so far this year to claim a market share of 5.4%.

Combined, the Toyota and Isuzu-based models account for more than 80% of total pickup sales, leaving other pickup truck manufacturers such as Nissan, Mitsubishi and Ford-Mazda relying heavily on exports.

Passenger car sales in decline

Passenger car sales in the first 10 months of 2005 declined by 13.3% to 144,975 units, with Toyota one of the worst performers with volumes dropping by 15.3%. The company remained the dominant player in this segment, however, with sales of 71,647 units. Honda was the worst performer by far with a decline of 26.4%, as volumes dropped to 41,094 units from 55,870 a year earlier. Mitsubishi’s car sales shot up by almost 81% during this period, albeit from a low level and reflecting strong sales of the new Granvia MPV.

Mitsubishi’s head of marketing in Thailand, Vigrant Amatayakul, said the poor passenger car market performance is down “to a lack of new model launches, but this will change next year with Honda and Toyota both planning new car launches.

“At Mitsubishi, we will be happy to retain our current car market share next year,” he added.

Mitsubishi redesigned its pickup truck in August and has high hopes for the new Triton line. Capacity is being lifted to 200,000 units at its Rayong plant on the eastern seaboard to accommodate the additional demand that has been anticipated.

“We hope to have a double-digit share of the vehicle market in the coming months,” Amatayaku said.

He expects market conditions to toughen in the final months of the year and is forecasting total market volume of 650,000 units for the whole of 2005.

“Pick-up truck sales growth will slow sharply next year, although I do not expect overall vehicle sales to decline in 2006”. He sees the passenger car segment, with the new launches scheduled, to be the most dynamic segment next year.

With inflation expected to be in the 4.5-5.0% region this year, economists believe that interest rates will continue to rise in the medium term. This will also reflect the rising rate trend in the USA. By the end of 2006, the Thai lending rate is expected to be around 8%.

“The marketplace will get more competitive and marketing campaigns and discounting will be stepped up to bring buyers into the market”, added Amatayakul.

Tony Pugliese

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