Thailand’s new vehicle sales continued to decline sharply in February, by 26% to 52,843 units from 71,551 a year earlier, according to the latest wholesale data released by the Federation of Thai Industries (FTI). The data excluded some key brands including BMW and Mercedes-Benz.

The market had been in decline for over a year after an initial rebound from the Covid pandemic with sales falling 9% to 775,780 units in 2023.

The market is now the third largest in South-east Asia after Indonesia and Malaysia, but the country remained the region’s largest vehicle producer with output of 1.84m units last year.

With the Bangkok International Motor Show set to get under way later this week, it was evident heavily indebted-consumers and small businesses were struggling with the central bank’s interest rate hikes over the last 18 months, from 0.5% to 2.5%.

Vehicle finance companies have also increased their rates and tightened lending criteria.

In the first two months of the year, sales were down 21% at 107,657 units from 137,133 in the same period of last year, with weak demand for pickup trucks continuing to drive the market lower.

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The FTI also pointed to a sharp slowdown in demand for internal combustion engine (ICE) passenger vehicles, with sales plunging by 41% last month, as interest in electric vehicles from China continued to grow.

Most battery electric vehicles (BEVs) sold in Thailand so far are imported assembled from China, ahead of local production expected to ramp up later this year.

In January, Great Wall Motors became the first Chinese automaker to mass-produce BEVs in the country, starting with the Ora. Chinese BEVs this week were once again expected to take centre stage at a Thai show with key players such as BYD already announcing substantial discounts.

Vehicle production fell 15% to 275,792 units in the first two month of the year while exports were slightly lower at around 176,000. Earlier this year the FTI predicted vehicle production to rise 3% to 1.9m in 2024.

The government last month announced new incentives aimed at increasing sales of battery powered commercial vehicles, including trucks and buses, to encourage local production and establish a local supply chain.