The Federation of Thai Industries (FTI) reports Thailand’s motorcycle production and sales are falling this year as the country’s economy struggles due to high household debt and low consumer spending power.
Due to uncertainty surrounding the weak economy, people are being frugal with their spending. In addition, a number of businesses have recently chosen to fire 10,000 employees in order to reduce operating expenses, according to Surapong Paisitpatanapong, vice-chairman of the FTI and spokesperson for the federation’s Automotive Industry Club.
Banks tightened their requirements for auto loans due to high family debt, which had an impact on the nation’s sales of cars and motorcycles.
Thailand’s manufacture Production Index averaged 98.2 points in the first four months of this year, down 2.06% year over year. The Office of Industrial Economics attributes this decline primarily to slow automobile manufacture in the face of high household debt and rising energy costs.
“These problems, together with a delay in state budget spending earlier this year, dealt a blow to the economy,” said Surapong.
The House of Representatives approved the 3.4-trillion-baht budget plan in March of this year, but the establishment of a coalition government in 2023 was a drawn-out process that delayed budget allocation.
According to Mr. Surapong, the club has no intention of changing its goal for motorcycle manufacture this year because it anticipates additional initiatives from the government to stimulate the economy.
This year, Thailand is anticipated to produce 2.12 million motorcycles, of which 1.7 million would be produced for local market and 420,000 for export.
With 837,975 fully built-up units—a reduction of 8.9%—and 175,690 totally knocked-down units—a rise of 14.2%—the total motorcycle manufacturing declined by 5.6% year over year to 1.01 million units from January to May of this year.
According to the club, during this five-month period, motorcycle exports decreased by 5.5% year over year to 359,603 units, while domestic motorcycle sales declined by 9.1% year over year to 739,988 units.
Thailand’s House Hold Debt 91.4% of GDP
In January the TMB Bank reported, Thailand’s household debt is likely to reach 16.9 trillion baht, or 91.4% of GDP, by the end of this year, with the banking system’s non-performing loans (NPLs) valued at approximately 152 billion baht, according to TMB Thanachart Analytics.
Household debt stood at 16.2 trillion baht at the end of the third quarter last year, up 3.4% from the same period the previous year, and accounted for 90.9% of GDP.
The 3.4% increase was lower than the same period in 2022 because commercial banks tightened lending procedures, which contradicted credit card loans, leasing, and personal loans, which expanded at a faster rate over a decade, according to TMB Thanachart Analytics.
NPLs in the banking system rose by 2.79% to around 152 billion baht, while outstanding auto loan repayments, which were past due by 1-3 months, were about 170 billion baht, excluding loans by non-bank organisations and special financial institutions (SFIs).
The bank stated that the predicted sluggish expansion in household debt this year is consistent with the gradual economic recovery.
Thailand’s household debt level in the future remains fragile due to the slow rate of economic recovery, even though the economic outlook for this year is stronger than the previous year, rising financial charges, which may influence debtors’ ability to repay, and a lack of financial discipline among Thais.
Household debt of more than 80% of GDP will have a long-term impact on consumption and economic growth. According to TMB, one-third of household debt is for consumption, such as credit card borrowing and personal loans, both of which are deemed non-productive.
As long as the grassroots economy is weak, borrowers’ debt servicing ability will not improve, according to the bank, which proposes responsible lending practices with the implementation of risk-based pricing to strengthen home debtors’ financial discipline.