COVID-19 hit Thailand automotive industry needs government support, says GlobalData

Following the news that automotive sales in Thailand declined by 24.8% year-on-year in July 2020;

Animesh Kumar, Director of Automotive Consulting at GlobalData, a leading research and consulting company, offers his view:

“Thailand, like most of the markets across the globe, witnessed a decline in the automotive sales during the COVID-19 pandemic. July 2020 domestic car sales reached 59,335 units, which reflect 14 consecutive months of year-on-year decline. The market was already on a downward spiral and COVID-19 only escalated the troubles. January-July 2020 sales reached 2008 levels in Thailand with only 387,975 vehicles sold during the period.

“Tourism and exports play a significant role in the Thailand economy and both have been severely impacted due to the pandemic. The pandemic resulted in country-wide movement restrictions, leading to disruptions in supply chain and automotive production. H1 2020 export and production declined 37.3% and 43.1%, respectively, year-on-year due to limited overseas demand amid COVID-19. The lockdown also kept potential buyers away from dealerships, which impacted the sales volumes. Since the easing of the lockdown restrictions, the vehicle sales have increased but they are much below the 2019 levels.

“Factors like lockdowns, decline in production and exports, decline in personal income levels during the pandemic, absence of stimulus/incentives by the government to boost vehicle sales can be blamed for the recent troubles. The state of the economy must also be taking a toll on the consumer sentiments. The Bank of Thailand in June predicted Thailand Gross Domestic Product to decline by 8.1% in 2020. In Q2 2020, the GDP declined by 12.2% year-on-year, which is the biggest decline since the Asian Financial Crisis of 1998.

“Against the backdrop, for a complete turnaround, Thailand must address issues including poor economic growth, political unrests, decline in FDI and decreased level of consumer confidence as well as private consumption. The Thailand auto sector is in immediate need of measures for demand-revival. The government needs to look at the suggestions made by the industry body, the Federation of Thai Industries (FTI), which include the introduction of scrappage policy, reduction of excise tax and delaying the implementation of Euro 5 emission standards in Thailand.”

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