BANGKOK -- Thailand's automotive industry is not out of the woods yet despite a strong showing at the country's biggest annual motor show, where a 25% increase in car bookings belied deep discounts offered to clear inventory amid cooling demand.
Final sales may land at only half of the 53,000 cars booked at the Bangkok International Motor Show, which ended Sunday. The high ratio of non-performing auto loans -- at 12% as of February -- has forced financial institutions to keep a tight leash on new loan approvals. The Federation of Thai Industries projects an auto loan rejection rate of 30% to 50% this year.
Price cuts helped electric vehicle bookings to reach 17,517, more than doubling from 9,234 last year. Chinese EV makers BYD, GAC Aion and MG have offered discounts of up to 23%, while Tesla's Model 3 sedan is now priced 9% to 18% lower in Thailand.
"The price war is not going to end very soon," said Naruedom Mujjalinkool at Krungsri Securities. "The starting price is almost 900,000 baht ($25,000). If you're looking at the price in China, it's around 500,000 or 600,000, so they still have a chance to cut the price by 10% or 15%."
The current market bodes ill for Thailand's auto industry as it embarks on retooling for electric vehicle production. Generous incentives under Thailand's EV 3.0 program granted customs and excise tax breaks for imported vehicles while EV companies built local factories. Local production lines for BYD, Great Wall Motor, Neta and MG are due to go online this year.
That means all 76,000 electric vehicles registered in Thailand last year were imported, sending car imports up by 58% and denting domestic production.
"We would have seen stronger growth in domestic car production in 2023 if EVs had been produced domestically," said Naruedom.
A global decline in EV sales may put more downward pressure on prices in Thailand, with local production coming online and at least 10 new models launching this year. Analysts at HSBC expect BYD's overseas volume to reach 450,000 units in 2024, an 85% annual increase.
Even as BYD begins local production, auto parts makers will likely receive only small orders from Chinese EV brands, which will continue to import components while Thai suppliers learn to meet EV parts standards, according to Krungsri Research.
Early entry and a flashy rollout allowed BYD to secure a 40% market share in Thailand, followed by Neta at 17%, MG at 16%, Tesla at 11% and GWM at 9%.
BYD booked 5,345 cars at the Bangkok Motor Show, outpaced only by Toyota at 8,540 units. The Japanese automaker is staying the course on hybrid vehicles rather than immediately shifting to fully electric cars. Hybrid car sales in Thailand grew by 22% between January and February, outpacing fully electric vehicles at 14%.
That strategy may work in North America and Europe, where consumers are wary of battery longevity in colder climates. Analysts remain bullish, however, on Thailand's EV adoption, as fuel prices are expected to rise. Government subsidies on diesel may decrease as the state oil fund is depleted, and wider conflict in the Middle East has put upward pressure on crude oil prices.
"The key issue in Thailand is the gas price. Thai people believe that oil prices are on the uptrend, so in the end, EVs may make up 20% to 25% of final sales from the motor show," said Naruedom.