TMB Analytics predicts that in 2021, domestic car sales will be between 835,000 and 850,000 units, representing a growth of 5.5% to 7.3% due to improved exports and a gradual recovery in the agricultural sector. It suggests that by the end of the year, there is potential for a significant rebound driven by the recovering service sector and consumer purchasing power stemming from the demand for new cars.

In 2020, domestic car sales totaled 792,146 units, a decline of 21.4%. The primary reason for this drop was the slowdown in purchasing power at the beginning of the year, compounded by the impact of lockdown measures to prevent the spread of COVID-19 from April to June. However, after the easing of lockdown measures, overall car sales gradually recovered, with a decline of only 4.2% in the second half of the year, an improvement compared to the first half's decline of over 37.3%. When examining the types of vehicles, commercial vehicle sales in the second half grew by 2.5%, better than the first half's decline of 34.4%, while passenger car sales in the second half declined by 11.8%, also an improvement over the first half's 40.6% drop, indicating a positive recovery trend for commercial vehicles in the latter half of the year.

 

Tracking the Recovery of Domestic Car Sales Supported by Exports and Agriculture

            TMB Economic Analysis Center or TMB Analytics expects that domestic car sales in 2021 will be between 835,000 and 850,000 units, with passenger cars growing by 4.7% to 6.5% and commercial vehicles growing by 6.1% to 7.9%. It is estimated that in the first quarter of the year, sales will slow down as consumers remain concerned about the COVID-19 outbreak. However, as the situation improves, sales are expected to gradually return to normal levels, supported by economic factors and behavioral factors as follows:

Economic Support Factors

        1) Recovery in Exports The vaccination rollout against COVID-19 in many countries will help the global economy recover, leading to an improved global trade environment in the second quarter of 2021. It is expected that Thailand's exports will grow by 3.4% from a previous decline of 6.9%, with improved products including computers, electronics, electrical appliances, food, automotive and parts, chemicals, and machinery. Therefore, workers in these sectors will continue to have purchasing power.

        2) Improved Agricultural Sector in 2021 The GDP of the agricultural sector is expected to grow by 1.3% to 2.3% due to favorable weather conditions for farming, sufficient water supply, and government price guarantee policies for agricultural products. This will lead to improved trends for various agricultural products such as rice, rubber, cassava, palm oil, pineapple, durian, chicken, and pork, both in terms of quantity and price, as they are in demand in both domestic and international markets. Thus, labor in the agricultural and agro-industrial sectors in the regions will still have the ability to purchase vehicles, especially pickup trucks.

        3) Low Interest Rates and various promotions to entice buyers. Interest rates this year are expected to remain low, following the Bank of Thailand's policy rate at 0.50%. Additionally, car manufacturers are offering sales promotions with fixed interest rates around 2-3% per year and long-term installment plans, which will encourage consumers with purchasing power to make decisions.

 

Behavioral Support Factors

        1) Demand for New Cars from First Car Buyers The first car program from 2011 to 2012 saw over 1.1 million participants, with a requirement to hold the vehicle for more than 5 years before selling it. It is observed that participants who have held their vehicles for 6-7 years have gradually sold their cars and switched to new ones, leading to annual sales reaching 1 million units between 2018 and 2019. However, when comparing sales during the first car program and the sales boost from car manufacturers in 2012-2013, which totaled 2.77 million units, against the cumulative sales in 2018-2019 of 2.05 million units, it is evident that there remains a demand from first car program participants who have held their vehicles for over 7 years, ready to sell for a new car, estimated at around 600,000 to 700,000 units, if they have confidence in their future income.

        2) Demand for New Cars Due to Aging Vehicles An analysis of the average age of vehicles on the road (calculated from the proportion of vehicles classified by age, based on statistics from the Department of Land Transport) shows that the average age of vehicles on the road is higher than historical averages (2007-2020). In 2020, commercial vehicles had an average age of 12.3 years, compared to the historical average of 10.8 years, while passenger cars had an average age of 9.1 years, slightly higher than the historical average of 8.7 years. The increasing age of vehicles is a supporting factor for the demand for new cars, which is an additional reason for the recovery of commercial vehicle sales last year, aside from economic recovery factors.

       3) New Car Technologies Attracting Buyers Car manufacturers are launching new models that not only compete in design but also in offering modern technologies to consumers, such as safety systems, braking assistance, and environmental assessment systems. Additionally, they are presenting energy-efficient engine technologies, including hybrid and electric options, providing consumers with excellent choices.

 

Risks Holding Back Car Sales

        Domestic car sales still face risks that need close monitoring, including:

         1) Duration of the COVID-19 Outbreak If strict control measures and the COVID-19 outbreak extend beyond the first quarter of this year, consumer confidence will decline and delay purchasing decisions.

         2) High Household Debt Levels (over 85% of GDP) High debt-to-income ratios will be a significant factor in consumers' purchasing decisions, and financial institutions will tighten credit assessments this year, especially for consumers working in sectors that have not yet recovered.

         3) Sluggish Tourism Sector This will reduce purchasing power related to tourism, which is part of the service sector.

          According to TMB Analytics, for private consumption to truly expand and lead to a strong increase in durable goods consumption, including cars and motorcycles, spending on durable goods and services must grow together. Therefore, the hope for COVID-19 vaccines by the end of the year will be a factor in reviving the service sector and improving domestic car sales.

 

Expectations for a Surge in Car Sales by Year-End Due to Economic Recovery and Demand for New Cars

          TMB Analytics estimates that car sales at the end of this year have a chance to surge beyond expectations if the service sector can recover due to hopes for COVID-19 vaccines being administered to the public both domestically and internationally, leading to a gradual revival in tourism. This will result in improved economic activities, and combined with the demand for new cars from first car program buyers who have held their vehicles for over 7 years and the average age of vehicles on Thai roads being higher than historical averages, as mentioned earlier, will accelerate the "possibility of a significant recovery by the end of this year."