The most recent statistics show that 1,320,000 units were produced up to end-August 2014, 22.44% fewer than during the same period in 2013.

As a result, Ipsos Business Consulting is now projecting a best-case production scenario for 2014 of around 2.06 million units (down 17% on 2013), but given continuing negative impacts a more realistic scenario would be around 1.9 million units (down 23% on 2013).

This forecast assumes that the export market performs in line with market expectations. The firm added that it is the slump in domestic sales that continues to have a negative impact on growth, with cumulative sales to end-August 2014 down 40% on last year. Major players such as Honda (sales down 40%) and Toyota (down 26%) have already adjusted their own 2014 production forecasts for Thailand downwards. 

Colin Kinghorn, chief operating officer at Ipsos Business Consulting, said that Thailand has not experienced any significant change in consumer confidence over recent months, adding that the domestic market remains in a somewhat depressed state.

In May, Sanpichit Songpaisan, country manager for Thailand, highlighted the increasing levels of household debt in Thailand, observing that the automotive industry should be wary of its potential impact, adding: ‘This continues to pose significant risks for the automotive industry as well as those involved in auto financing, who will most likely start to adopt much more rigorous criteria for screening and approval of auto loans, with a knock-on effect on domestic demand.’

The firm added that Indonesia is adopting an aggressive strategy in order to usurp Thailand’s crown as the automotive hub of ASEAN, although it noted that Indonesia has also been forced to revise its 2014 production forecast downwards to 1.3 million vehicles from 1.4 million, due to slowing demand in the archipelago. 

‘It seems beyond doubt that Indonesia will overtake Thailand in terms of automotive output; it is just a question of when,’ said Songpaisan. ‘Our view is that it is likely to be 7 to 10 years before Indonesia surpasses Thailand’s production figures. Even then, you will find that Thailand’s component manufacturers are feeding Indonesian as well as Thai automotive supply chains. And Indonesia has to focus much more on improving the quality of production over the entire supply chain, if it is to be seen as a serious alternative to Thailand or China as a production hub for the export market. This gives the Thai industry time to develop and implement its strategy for consolidating its position as the ASEAN automotive hub.’

Ipsos added that whilst medium to long-term prospects for Thailand remain positive, the outlook for 2015 still has a big question mark over it.

The firm commented: ‘If the level of household debt in Thailand remains so high, it is difficult to see how the industry can achieve sustainable growth in the short term. The anticipated boost to consumer confidence has not yet materialised in the second half of this year, and it is not immediately apparent when it will occur.’