Thailand’s Cooling Car Sales May Shift Economy Into Lower Gear | 3/28/2017 | Staff
BANGKOK (Reuters) – Efforts by Thailand’s central bank to talk down a spike in auto loans amid wider concerns about household debt have sent a chill across the country’s car dealers, which are struggling to source finance for new customers.

Although the Bank of Thailand (BOT) has taken no policy action yet, analysts say the mere prospect of car loan curbs has been enough to tighten the finance spigot to domestic buyers.

Heat - Auto - Finance - Deceleration - Car

While that may take some of the heat out of auto finance, the sudden deceleration threatens car makers, dealers and the wider sector, which has been one of few growth drivers against a backdrop of declining exports and sluggish investment.

“Our car sales in April and May fell by 50%,” said Sumete Patchuttorn, managing director of Mazda Mahachai.

Finance - Firms - Lending - % - %

“Finance firms are more cautious about lending now,” he said, adding that about 60%-70% of his clients’ loan requests were rejected this year, up from 30% in the previous year. More than 80% of car buyers rely on loans.

The car industry accounts for about a tenth of gross domestic product in Southeast Asia’s second-biggest economy. Bank of Ayudhya said car sales contributed 0.4 percentage point to last year’s 4.1% economic growth.

Cars - Export - Part - Sector

Although roughly half the cars are made for export, that part of the sector has also been declining.

“A slowdown in car sales this year will also drag down consumption,” said Naris Sathapholdeja, head of TMB Analytics, adding car sales contributed a fifth to last year’s 4.6% growth in consumption. He sees GDP growth of 3% this year, with consumption...
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