Thai Auto Sector: Falling Orders and Rising Household Debt

The Thai auto sector, once a thriving industry, is now grappling with a double whammy of falling orders and soaring household debt. This perfect storm has left automakers and suppliers struggling to maintain production levels and profitability. Let's delve into the factors driving this downturn and explore potential strategies for the industry to navigate these challenging times.




The Thai economy, which grew by a mere 2.3% in Q2 2024, has left consumers with marginal income growth, insufficient for expenses, leading to a tightening of auto loan approvals. Household debt, which reached 90.8% of GDP in Q1 2024, has further exacerbated the situation, with a 50% rejection rate for car loan applications. This has significantly impacted the purchasing power of Thai consumers, leading to a decline in new vehicle sales.




The correlation between the rise in household debt and the decline in consumer confidence in the Thai auto market is evident. As consumers become more debt-averse, they are delaying purchases of big-ticket items such as vehicles and property. This shift in consumer behavior has led to a significant drop in sales, with Thailand's LV sales projected to fall by 19% YoY to 614k units in 2024.


The tightening of auto loan approvals has also been a key negative factor in the Indonesian auto market, with sales in July and August 2024 declining at a double-digit rate of 12% YoY. Indonesia's LV sales outlook has been revised downwards, projected to drop by 12% YoY to 815k units in 2024.




To mitigate the impact of falling orders and household debt, Thai automakers and suppliers can employ several strategies. Firstly, they can explore alternative financing options to make vehicles more affordable for consumers. Secondly, they can focus on improving the quality and reliability of their products to enhance their value proposition. Lastly, they can diversify their product offerings to cater to the evolving preferences of consumers, such as the shift towards hybrid and electric vehicles.


In conclusion, the Thai auto sector is facing significant challenges due to falling orders and soaring household debt. However, by adopting strategic measures, the industry can navigate these tough times and emerge stronger. The Thai government can also play a role in addressing the issue of rising household debt and its impact on the auto sector by implementing policies that promote economic growth and consumer confidence.