After signs of a rebound in December, an analyst forecasts that Thailand's market will bottom out in 2021, even as volumes for the year are still expected to be down on 2020.

Thailand's new vehicle market rebounded strongly in December 2020, with sales rising by over 7% to 95,636 units from 89,285 units in the same month of the previous year, according to wholesale data compiled by the Federation of Thai Industries (FTI).

While the rebound came against weak year-earlier sales, the vehicle market had become much more stable in the last few months. Day-to-day domestic economic activity in the country had largely returned to normal after the government eased social and business restrictions towards the end of the second quarter as the threat of COVID-19 receded.

The economy was still under significant pressure from weak private consumption and investment, however, while business and consumer confidence remained weak.

The Federation of Thai Industries (FTI) expects domestic car sales to decline by 5.3% in 2021, after a 21.4% slump in the previous year;

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, notes that 2020 remained a bumpy ride for the Thailand auto industry, with January-July sales slipping down to 2008 levels and the auto production witnessing y-o-y decline for straight 10 months of the year. "However, November and December showed signs of revival with y-o-y production and sales witnessing an increase, which is attributed to new car launches by automakers, attractive discounts and promotion campaigns and the financial stimulus by the government," he says.

"Weak domestic and overseas demand amid the COVID-19 pandemic, major supply chain disruptions affecting production, massive slowdown in tourism sector, subdued economic growth and negative consumer sentiments remained major factors behind the production and sales de-growth in 2020. Some of these factors may further impact the production and sales in 2021 along with second wave of COVID-19 in domestic and some export markets, and ongoing chips shortages in the picture. FTI expects the vehicle production to reach 1.5 million units in 2021, marginally up compared to 2020.

"Thailand Board of Investment (BOI)'s new investment privileges and tax breaks to manufacturers are expected to support automotive production.

Although volumes in 2021 are expected to remain below 2020 levels, Agwan says the underlying demand trend is improving. "The government's economic stimulus measures, growth in tourism, investment in infrastructure projects and government push for EV adoption are expected to boost automotive sales and support FTI's projection of 750K vehicles sales in 2021, which will be a 5.3% decline y-o-y but significant improvement compared to 21.4% decline in 2020."