ASEAN sales

July 2023: +5.8%; 265,999 units vs. 251,498
units

YTD 2023: +1.5%; 1,848,595 units vs. 1,821,896
units

• Light-vehicle sales in the Association of Southeast Asian
  Nations (ASEAN) recorded about 266,000 units in July 2023, marking
  an increase of 5.8% compared with July 2022. For the year-to-date
  performance, the market increased 1.5% to about 1.85 million units.
  The ASEAN market will likely decrease 0.2% to 3.34 million units in
  2023.

• Thai light-vehicle sales in July 2023 decreased 7.5% year over
  year to about 57,200 units. The current high household debt,
  tighter auto loan approval, poor export performance from global
  softened demand and rising political uncertainty have delayed
  consumer purchasing on automotives.

• In 2023, the Bank of Thailand has increased the interest rate
  by 25 basis points in January, March, May and August to 2.25%,
  which is expected to push borrow costs to its highest in eight
  years. Thailand’s July headline inflation slightly increased by
  0.38% from 0.23% in June, driven by the rise on prices of food and
  beverages. The government expects the inflation to continue to
  increase in August, according to world economic uncertainty and
  Thailand’s severe drought.

• According to the S&P Global Market Intelligence July 2023
  update, the Thai economy is set to improve by 3.38% in 2023;
  recovering domestic consumption (especially in the services
  sector), the pickup in foreign tourists and a better-than-expected
  global economy lead the improvement.

• The Tourism Authority of Thailand downgraded its 2023
  international tourism target from 30 million visitors to 25 million
  visitors, compared with 11 million visitors in 2022 and 40 million
  visitors in 2019. Mainland Chinese tourists — accounting for
  more than 25% of Thailand’s total visitors — should only be
  about 5 million visitors from 7 million-8 million visitors at the
  last expectation.

• Thailand’s export sector has faced challenges amid volatility
  in the global economy and financial markets. Softening global
  demand including the US, EU and mainland China, and concerns about
  geopolitical tensions have affected Thailand exports’ value.
  Exports in 2023 may contract by more than 2%, according to the
  Federation of Thai Industries.

• The coalition formation has been uncertain after election in
  May. This led to decline in domestic spending due to risk of
  protests and political instability. In addition, any delay in
  government formation would result in a delay in budget approval in
  the fiscal year of 2024.

• The overall chip shortage bottleneck and delivery time has
  improved for many manufacturers, although the problem is still
  delaying production and delivery for some models.

• We expect sales improvement, especially in late 2023, driven by
  lower inflation; the official announcement of a new prime minister
  and the cabinet; the peak season of foreign tourists; the easing of
  the automotive supply constraint problem; as well as the
  possibility of high promotion and rushing to buy some in-stock
  vehicles before completely built-up (CBU) battery-electric vehicle
  (BEV) benefits will end in December 2023 and the new Euro 5 will be
  applied in 2024.

• We expect 2023 sales to grow at a slower pace of 2.9% year over
  year to 0.85 million units. The downgrade is also possible
  considering rising negative risks, including the delay on new
  government formation, decrease in 2023 export and tourism targets
  by the government, and tighter auto loan approval according to high
  household debt.

• The rising star in the automotive segment in 2023 is the BEV,
  with support from government incentives, the high price of gasoline
  and concerns over fine particulate matter (PM2.5) pollution in
  Thailand. The government’s 2022 BEV incentives for CBU, including a
  reduction of import taxes, a cut of the excise tax and a cash
  subsidy worth up to 150,000 baht, will end before 2024. While we
  expect that original equipment manufacturers who joined in the EV
  3.0 scheme will start local BEV production in 2024 onward, many
  OEMs including Changan Automobile and GAC Motor are anticipated to
  participate in the tentative EV 3.5 scheme if it is approved by the
  new government.

• In the short term, the COVID-19 pandemic, the Russia-Ukraine
  war and the uncertain global economy will pressure the Thai
  economy, businesses, consumer behaviors and automotive market. We
  expect a k-shaped recovery among business sectors, while high
  household debt reaching 90% of GDP will hamper the ability to pay
  debt, affect decisions to buy high-valued goods and cause stricter
  loan approvals from financial institutions. In addition, automotive
  prices that were pushed up in 2023 will remain high, suppressing
  purchasing power and disrupting automotive demand. The slowdown in
  key economies will hurt the global economy including the ASEAN
  economy and consequently ASEAN auto demand. Therefore, a sales
  recovery will be further delayed, returning to the pre-pandemic
  level in 2025.

• The further urban expansion after the completion of the public
  transportation megaproject and substantial overseas investments to
  join the Eastern Economic Corridor — Thailand’s new flagship
  economic zone — will continue as many companies could allow
  more remote working and relocation away from crowded big cities;
  bordering provinces have also gained free-trade and labor
  opportunities with the creation of the ASEAN Economic Community.
  The government’s electric vehicle scheme will contribute to Thai
  market demand in the medium-to-long term. Continuous new vehicle
  launches, and the global battery price decline will lead to better
  affordability and a wider target consumer range in the future. In
  the longer term, the automotive industry will grow at a slower pace
  as penetration levels and public transportation — especially
  the Skytrain in Bangkok — expand. In addition, there are more
  concerns about limited roads, and high traffic congestion in big
  cities will be a future threat.

• Indonesia’s light-vehicle market in July decreased by 7.4% year
  over year to about 74,000 units. The negative growth was due to the
  slowdown in exports, the high interest rate and the Fed Fund Rate
  hike. Indonesia exports slumped by more than 20% year over year in
  June, amid the declining prices of its top commodities and the
  weakening demand from its key trade partners. The Bank of Indonesia
  hiked its policy interest rate at the beginning of 2023, which was
  higher than the last-year level. This is likely to limit the
  liquidity of car loans because cars will be less affordable for
  consumers. Fed Fund Rate hikes are likely to impact the Indonesian
  exchange rate. This can make Indonesia’s exports more expensive.
  The negative factors mentioned earlier can affect consumer
  confidence in buying big items. In a month-over-month comparison,
  the market also decreased by 2.6%. Many customers are waiting to
  buy vehicles during the auto show in August to receive good
  promotions and campaigns. In the year to date, the Indonesian
  market increased 3.7% year over year to about 540,000 units.

• We expect the 2023 market to slightly increase by 0.6% to about
  0.97 million units. The main factors influencing 2023 performance
  will likely be continuous strong private spending, leading to solid
  economic growth of about 4%-5% (close to 2022 level). New car
  models will be available in the market, offering fresh options to
  car buyers and restoring their purchasing confidence. Electrified
  vehicles will likely gain more market share thanks to the latest
  announcement by the government regarding a value-added tax (VAT)
  reduction, adding to the current low excise tax scheme; the
  government had announced the incentive, eligible for local
  assembled BEVs with local content of at least 40% that would lower
  the VAT from 11% to 1% from April to December 2023. However,
  ongoing high fuel price from the government subsidy cut to save the
  country’s costly budget, financial instability from monetary
  tightening, and the global economic slowdown spreading to the US
  will create unease for consumers.

• In the short-to-medium term, Indonesian car sales should
  continue to rise owing to robust demand, product refreshment,
  further corporate tax cut expectations and public infrastructure
  improvement. The fuel prices rising from the government subsidy cut
  since September 2022 will likely affect consumer purchasing. The
  high raw material prices owing to the Russia-Ukraine tension would
  dent market performance through the medium term, as it will likely
  raise car prices and add pressure to the affordability of a new
  car. In the long term, the market should grow, owing to the rising
  middle class. Considering the penetration rate in the country is
  still low, there remains plenty of opportunities for further growth
  in the years ahead. However, mass rapid transit (MRT) programs may
  result in consumers prolonging the decision to buy a new car,
  because MRT can accommodate many people at the same time through
  business areas that currently face severe traffic jams.

ASEAN production

July 2023: +2.7%; 337,697 units vs. 328,774
units

YTD 2023:+6.2%;
2,413,099units vs. 2,272,998 units

• The Association of Southeast Asian Nations (ASEAN) region’s
  light-vehicle production in July 2023 increased 3% year over year
  with 337,697 units built. Year-to-date production in July grew 6.2%
  year over year with 2.41 million units built, thanks to original
  equipment manufacturers’ strong outputs during the first half of
  2023, in a bid to fulfill the backlogs of 2022 across the region as
  well as the export momentum in Indonesia and Thailand. In the
  August forecast update, ASEAN’s full-year 2023 production remains
  the previous forecast outlook with 4.19 million units, a slight
  contraction of 1.8% year over year. Vietnam production forecast has
  been cut by nearly 35,000 units, primarily weaker production
  recorded during the first seven months of the year, as the
  automotive market has been significantly hit by the ongoing
  economic headwinds. However, it is offset by the upgraded forecast
  outlook in Indonesia and Thailand, thanks to the stronger than
  expected actual production during the second half. ASEAN’s
  production during the second half of 2023 should be able to
  maintain the output of over 2.1 million units amid the weaker
  market outlook across the region. The 2024 and 2025 outlook is now
  forecast to remain flat with 4.2 million and 4.3 million units,
  respectively.

• Thailand’s light-vehicle production in July recorded 145,148
  units, a growth of 3.9% year over year, while the year-to-date
  production of the first seven months of the year expanded 7.3% year
  over year with 1.05 million units built. This was significantly
  driven by OEMs’ production to fulfill the backlogs of 2022,
  particularly in the pickup, sport utility vehicle (SUV) and
  subcompact passenger car segments. Ford reportedly continued to
  face the chip supply constraints for the Ford Ranger during August,
  with an expected running rate at 80% of the normal capacity, and it
  could take until the fourth quarter to resume full-scale operation.
  In late July, Mitsubishi recently introduced the all new-generation
  Mitsubishi Triton pickup in Thailand and planned to ramp production
  for export from the late fourth quarter. Thailand’s 2023
  light-vehicle production was revised up by 18,800 units to reach
  1.84 million units, mainly due to revised actual production of
  Isuzu during the second quarter together with an upgraded third-
  and fourth-quarter outlook for Ford and Toyota. Federal of Thai
  Industries (FTI), an automotive association in Thailand, has cut
  their forecast for domestic sales and production to 0.85 million
  units and 1.86 million units, respectively, given the tightening
  monetary policies, high interest rate and slower demand outlook.
  Pickups should maintain their stronghold in Thai production with 1
  million units, accounting for 55% of the country’s total production
  on the back of robust export demand from the Middle East and
  Oceania market.

• Thailand’s Consumer Price Index (CPI) in July was slower than
  expected with an increase of 0.38% year over year, primarily due to
  the lower food and energy prices. In August, the Bank of Thailand
  raised the policy interest rate for the seventh consecutive hike to
  2.25%, the highest in the last 9 years.

• During 2023-25, major OEMs plan to launch their all-new
  vehicles in the mainstream midsize pickup segment, including the
  next-generation Mitsubishi Triton and the next-generation Toyota
  Hilux. Honda Motor Co. Ltd. announced the local assembly of the e:
  N1, a fully battery-electric compact SUV in the fourth quarter of
  2023. The new players, including BYD Auto Co. Ltd. and Horizon Plus
  (Foxconn-PTT’s joint venture), have announced the rollout of their
  battery-electric vehicles (BEVs) at their newly established Thai
  manufacturing facilities starting in 2024; the companies plan to
  export right-hand drive BEVs to the global market starting in the
  medium term. In the meantime, mainland Chinese OEMs including SAIC
  Motor Corp. Ltd. (MG) and Great Wall Motor Co. Ltd. plan to start
  local assembly of their BEVs by 2024 under the Thai government’s
  electric vehicle scheme and subsidy program. In addition, S&P
  Global Mobility analysts anticipate Changan Automobile Co. Ltd. and
  GAC Motor to receive the investment approvals from Thailand’s Board
  of Investment by late 2023 to build manufacturing facilities for
  electrified vehicles in Thailand, with a rollout plan from 2025
  going forward. Moreover, Chery is expected to join its mainland
  Chinese counterparts to enter the Thai market from 2024 with a
  local manufacturing plan from 2026 at the earliest. We expect the
  demand for Thai-built electrified vehicles including full-hybrid
  electric vehicles (FHEVs), plug-in hybrid electric vehicles (PHEVs)
  and BEVs will maintain steady growth, largely driven by the lower
  excise taxes and subsidies. The combined production of electrified
  vehicles including hybrids (FHEV, MHEV and PHEV) and BEVs should
  continue to rise from 38% of the country’s total production in 2026
  to 59% in 2030. The Thai government anticipates BEV production in
  Thailand to be 30% of the country’s total production in 2030.
  However, S&P Global Mobility analysts estimate the figure will
  reach 25%, given consumer skepticism and concerns over the
  development of charging infrastructure over the course of 2025-30.
  Nonetheless, Thailand will lead the EV market and production base
  in Southeast Asia owing to the government’s investment scheme and
  incentives, including subsidies and tax reductions coupled with
  OEMs’ manufacturing strategies and a strong automotive supply
  chain.

• We expected Indonesia’s light-vehicle production in July to
  have increased 6% year over year, with 117,935 units, while
  year-to-date production grew 6.8% year over year, or 774,627 units.
  In the August forecast round, 2023 production was slightly revised
  up by 5,000 units, given the revised outlook for mainstream
  subcompact multipurpose vehicles (MPVs). Having recorded the
  historic high production of 1.37 million units, with growth of
  29.1% year over year in 2022, Indonesia’s full-year 2023 production
  will maintain 2022’s level with only a mild contraction of 0.3%
  year over year, amid the slower pace of demand as well as high
  interest rate. Indonesia’s completely built-up exports will likely
  account for nearly 0.5 million, accounting for 40% of the country’s
  total production, thanks to the growing export demand for the
  mainstream B- and C-segment MPVs and SUVs from Hyundai, Mitsubishi,
  Suzuki and Toyota. Indonesia’s light-vehicle production forecast
  for 2024-25 is anticipated to maintain the flat growth of 1.41
  million and 1.42 million units respectively in the wake of slower
  automotive market demand post-pandemic. Over the past few years,
  Japanese OEMs in Indonesia have faced more challenges and intense
  competition from mainland Chinese and South Korean OEMs —
  particularly the mainstream B-segment MPVs and B-segment SUVs as
  well as the BEV segment — as Japanese OEMs are not expected to
  roll out the locally built BEVs before 2029. However, they should
  maintain their market stronghold in Indonesia, accounting for over
  80% of the country’s total production through the longer term. In
  the medium term (2025), MPVs and SUVs should continue their
  mainstay in Indonesia with a production share of 38% and 32%,
  respectively.

• Indonesia’s economy grew 5.17% during the second quarter of
  2023, accelerating from a revised 5.04% during the first quarter of
  2023, supported by strong consumer spending during the Muslim month
  of Ramadan. Private consumption, which contributes half of
  Indonesia’s GDP, grew 5.23% year over year. Indonesia’s CPI cooled
  to 3.08% year over year, remaining within the Bank of Indonesia’s
  (BI’s) target range of 2%-4%. BI kept the key interest rate
  unchanged in July at 5.75%.

• In April, the Indonesian government announced the incentive for
  locally assembled BEVs with local content of at least 40%, through
  a reduction of the value-added tax (VAT) from 11% to 1%, effective
  from April 1 to Dec. 31, 2023. The government is expected to
  introduce new tax incentives for BEVs, including further VAT
  reduction from 1% to 0%. In addition, luxury goods sales tax for
  imported BEVs will be exempted, while the deadline localization of
  locally built BEVs with at least 40% requirements in 2024 will be
  revised to 2026. In the short-to-medium term, Hyundai and Wuling
  Motors Ltd. will benefit from the government’s VAT reduction
  program as they are assembling BEVs in the country. We expect Chery
  Automobile Co. Ltd. and DFSK Motor to start the local assembly of
  their BEVs by 2024 and 2025, respectively. In addition to the huge
  investment from OEMs, Indonesia is bracing to become the key
  production base of EV battery producers on the back of the
  country’s rich nickel reserves, which account for over 24% of world
  nickel production. The global EV battery producers including CATL
  Co. Ltd. and LG-Energy Solution Ltd. will likely commence EV
  battery production during 2025-26. We expect BYD to invest in BEV
  assembly in Indonesia after the rollout of its local manufacturing
  facilities of EV buses (2026). Indonesia will remain the Southeast
  Asian bloc’s second-largest producer after Thailand, with
  production to reach nearly 1.5 million units by 2029 on the back of
  rising purchasing power from the working population, which accounts
  for nearly 40% of its total population of 270 million, and growing
  export outputs coupled with steady economic expansion.

• In July, Malaysia’s light-vehicle production posted a growth of
  2.7% year over year with 52,305 units produced. Year-to-date
  production grew 13.7% year over year with 408,551 units, primarily
  due to robust production in a bid to deliver 2022’s backlogs to
  customers during the first half of the year. As OEMs have now
  returned to the normalized production rate, we anticipate weaker
  production outputs during the second half of 2023, given the
  post-pent-up demand effect and consumer sentiment over slower
  economic expansion. Malaysia’s full-year 2023 production is now
  expected to decline 3.5% year over year with 0.66 million units.
  However, Malaysia’s production during 2024-25 should continue to
  maintain negative growth with annual outputs of about 0.62 million
  amid high vehicle penetration in the domestic market, which
  accounts for country’s production of nearly 94% with limited export
  potential.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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• Source: http://www.spglobal.com/mobility/en/research-analysis/asean-sales-production-commentary-august-2023.html