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Thai, Indonesia car sales in the doldrums

POSTED BY Nigel Andretti ON 12 January 2015
Automakers held sales promotions to drum up interest at the Thailand International Motor Expo 2014.

Automakers held sales promotions to drum up interest at the Thailand International Motor Expo 2014.

NEW car sales have been slowing in Indonesia and Thailand, the biggest and second-biggest auto markets in Southeast Asia, and a rebound in 2015 looks unlikely for both.

This trend spells tough times ahead for Japanese carmakers, which hold a combined 80 percent market share in the region, Nikkei Asian Review has reported.

In Indonesia, November new car sales plunged 18 percentn the year, the third straight month of decline, according to the local auto industry data. New car sales for 2014 are expected to remain more or less at the same level as the previous year, at 1.23 million.

Indonesian President Joko Widodo and his government have cut fuel subsidies since mid-November, and local consumers have been reluctant to buy new cars due to concerns over higher fuel prices. As with Malaysia, which also cut fuel subsidies, stricter requirements for auto loans have also contributed to a sharp drop in new car sales.

In Thailand, new car sales dropped 22 percent in November, marking the 19th consecutive month of decline. The Thailand International Motor Expo 2014 ran from late November through Dec. 10 in a suburb of Bangkok. Industry observers were paying close attention to the number of pre-orders for new cars there as a gauge to predict coming trends in the Thai auto market. The expo organizer had estimated 50,000 or so orders would be received, which is equivalent to 70 percent of monthly auto demand. However, the actual numbers came to approximately 45,000, 10 percent less than the estimate.

New car sales for all of 2014 will likely come to around 870,000 units, down about 30 percent from a year earlier, according to industry sources.

In contrast, other Southeast Asian countries have seen steady growth in new car sales. November new car sales rose 6 percent on the year in Malaysia, 35 percent in the Philippines, 57 percent in Vietnam, and 80 percent in Singapore. In all of these four countries, new car sales for 2014 likely surpassed the level seen a year earlier.

However, all of these markets are relatively small, which means their gains are not strong enough to drive growth in the Southeast Asian car market as a whole.

The Indonesian government has done away with subsidies for regular gasoline to ease its fiscal burden. The country has now shifted to a fluctuating price system and fuel prices have fallen. But it is unclear how prices will behave going forward. Some analysts expect fuel prices will remain more or less flat from last year.

Higher fuel prices weigh on Indonesian consumers, which in turn increases business opportunities for fuel-efficient automobiles. Indeed, subcompact and fuel-efficient cars, which qualify for tax relief under the Indonesian government’s low-cost green car program, are gradually increasing their market share. In November alone, such models accounted for 17% of the Indonesian auto market, up 3 percentage points from the beginning of 2014.

In the meantime, industry observers remain cautious about prospects for Thailand this year. New car sales are expected to hit somewhere between below 900,000 units and 950,000 units in 2015, a slight increase from the level a year earlier.

While strong growth will likely continue in the Philippines and Vietnam, new car sales are expected to grow just over 5 percent this year in Southeast Asia as a whole amid the sluggishness in Indonesia and Thailand. Malaysia also faces uncertain times with the impact of the introduction of a goods and services tax only due in April. Falling oil prices and a decline in the value of the ringgit against the US dollar are causing Malaysian car companies to put off forward planning.

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