The decline in the Thai market was triggered by the long New Year holiday, which delayed vehicle purchases, coupled with the wait for the new Toyota Hilux, which was released on 21 May. Sales of Passenger Vehicles saw a drop of 23%, while those of Commercial Vehicles fell by 32% YoY.

Despite this considerable decline, LMC’s outlook for Thailand remains unchanged as sales are expected to recover in the Pickup segment with the launch of the new Toyota Hilux, while an excise tax increase is expected to take place in January 2016, which will affect vehicle prices in the future. Purchases are expected to be brought forward to 2015 as a result of the impending tax, of which the rate of increase will vary, depending on engine size and emissions levels.

As expected, sales in Malaysia fell sharply in April due to the introduction of a new tax scheme (or GST) on 1 April (details of its impact can be found in the April issue of this report). Although vehicle prices fell only slightly, the price of many consumer goods increased. Consequently, households reined in their spending, but the general consensus among economists is that consumers will adapt to the new tax and consumption will rebound in Q4 2015.

Sales in Indonesia, ASEAN’s largest market, declined by 22% YoY and 18% MoM in April. The fall in light vehicle demand was the result of rising vehicle prices (on the back of the weak Rupiah), higher fuel prices (following cuts to subsidies), the dismal economic situation and the government’s economic stimulus policies.

LMC Automotive summarised Indonesia’s economic situation and its impact on light vehicle demand as follows: “ Q1 GDP growth was lower than expected and the slowest since 2009. Year‐on‐year (YoY) growth has slowed steadily since peaking at 6.7% in Q2 2010. The deceleration was seen in every aspect of the country’s economy, from domestic consumption, to investment and government spending."

The export sector continued to decline YoY through April (‐11% in Q1 and ‐8.5% in April). Exports have been depressed due to weaker demand in China, lower global commodity prices, and the Indonesian government's ongoing ban on unprocessed minerals.

Based on government data, the unemployment rate in February 2015 increased to 5.81% (or 7.45 million unemployed) from 5.7% (or 7.15 million unemployed) in February 2014, reflecting lower household purchasing power from the slow economic growth.

The Indonesian government recently announced an incentive program to boost the economy whereby the down payment for first‐time house buyers will drop from 30% to 20%, the result of which could be that consumers either opt to put a down payment on a home in favour of buying a vehicle, or hold off on buying a car in anticipation of a similar scheme being launched for vehicles.

LMC Automotive concluded that Indonesia’s economic conditions will exert ongoing pressure on light vehicle sales in both the short and medium term, which has led the organisation to cut its 2015 sales outlook to 970k units from the 1 mn unit‐level in the previous forecast.