The Thai domestic vehicle market began to stabilise in July and August, with moderate year-on-year volume increases in the last two months compared with a cumulative 12.6% sales decline in the first half of the year.

Total industry volumes in August increased by just under 1% to 54,163 unites, after a similar rise in July amid signs that consumer confidence is beginning to pick up as the year-end general elections get closer.

Passenger car sales were 4.7% higher at 30,079 units in July and August combined, compared with a year earlier, reflecting strong sales of the new Toyota Vios mid-sized saloon in particular, which was launched in April at the Bangkok motor show.

In the January-August period, vehicle sales dropped by 9.4% to 397,817 units, compared with 439,036 units sold a year ago. Passenger car sales in the first eight months of the year fell 7% to 109,079 units from 117,383 a year earlier, despite the recent upturn. The all important pickup truck segment shrank by 13.3% to 238,775 units, from 275,551 units a year earlier.

Sales of other commercial vehicles, however, remained strong throughout the eight-month period, reflecting strong demand from the construction sector and from ongoing international trade growth - particularly exports.

Policy uncertainty remains

The economy has remained subdued in the first half of the year as political uncertainty continued to drain consumer and investor confidence. In particular, a lack of clarity in economic policy-making on the part of the military junta has subdued sentiment since it seized power a year ago this month.

Interest rates look close to their cyclical low at present, although a further small reduction before the end of the year to below 4% is widely expected. The baht's strength against the dollar is a concern, particularly for exporters to the USA. But a further cut in interest rates would help consolidate a recovery in the domestic economy in the fourth quarter of the year.

Inflation remains within range, helped by the strong baht-dollar exchange rate which has helped insulate the economy from rising oil prices so far this year.

Full-year GDP growth is expected to be between 4.0-4.5% in 2007, with a expected pickup in domestic spending in the fourth quarter as a result of election-related spending. Provided that a reasonably popular government is elected, a pick-up in investments could take place in the second half of 2008 - in the wake of a favourable package of economic policies in its earlier months.

New Vios helps Toyota

Toyota's performance this year has begun to improve markedly in the last two months. Cumulative sales for the January-August period declined 3.2% year-on-year to 175,814 units, compared with 181,703 units a year earlier. In the first six months of the year, however, its sales had declined by 12.6% to 126,074 units.

The launch of the new Vios has helped Toyota increase sales of its passenger cars. Combined with an aggressive marketing programme for all its vehicles, overall volumes have recovered strongly in the last to months, by 9.3% year-on-year. Its pickup truck sales declined by 7% year-on-year in the January-August period to 98,160 units.

Isuzu saw its sales fall by 18.6% to 91,953 units in the first eight months of the year, compared with 113,001 units a year earlier. The company has taken the brunt of the pick up truck market decline so far this year, followed by Chevrolet and Mitsubishi. Only Mazda has reported growth in pickup truck sales to date, in a market segment that has declined by 13.3% in the first eight months of this year to 238,775.

In the same period, Honda's sales declined by 5.2% to 41,811 units, with the City model finding it hard to compete with the new Toyota Vios.

Tony Pugliese

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