ASEAN Sales & Production Commentary- August 2023

ASEAN sales

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

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

  • 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
  • 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

YTD 2023:+6.2%;
units 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,
  • 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
  • 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%,
  • 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

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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