MOTTO AUCTION

Used Car Supply and Demand Continue to Improve but Fall Short of the Mark due to Long Holidays.

Since May 2020, the used car supply and demand in Thailand has been moving in the same direction. Supply volumes of used cars in early 2020 was much higher than 2019 and reached its peak in May 2020 - a month before the arrival of government “advised” / “recommended” bank driven debt moratorium measures for selected customers. Motto understood that 1.4M customers applied for privileges under the moratorium system and once the moratorium was implemented, both supply and demand of used car declined immediately as number of seized cars decreased and car buyers became pessimistic about the economy. Plus new car sales volumes were hampered by a drop in bank financing approvals made by applicants. The fall in demand was less than the fall of supply proportionally which revealed a strong demand for used cars, though lower than the previous year. Covid-19 also impacted new car production and forced middle-income consumers to opt for a cheaper alternative. The recovery of the used car market was noticed starting in Q4 2020. Yet, this trend was broken again in April 2021 as a result of long Songkran holiday whereby repossessions were stopped temporarily; this had an effect on auction supply volumes.

An Upward Trend in Used Car Prices is expected to continue, driven by economic slowdown and Lower Supply of New Cars and demand for used cars nationwide.

Used car prices have been moving on an upward trend since the first outbreak of Covid-19 in 2020. The economy, performing at less than optimal levels in Thailand combined with the Covid pandemic confirmed that many car buyers turned to used cars due to lower cost and to avoid public transport thereby avoiding crowds. The lower supply caused by the debt moratorium measures was key to  a reduction in used car supply, thereby driving market prices higher with limited supplies being available .

April 2021 during the longer than usual Songkran holiday further pushed down supply, pushing the used car price index to rise to 164.57 by April 2021.

This index snapshot from Motto Auction – the leading provider of market based intelligence in Thailand indicates that the trend  dropped slightly in May but the upward trend in the overall market picture will continue until the end of Q2 2021 when the debt moratorium program for retail debtors will cease. Motto has an optimistic outlook on prices of medium to large-sized passenger and European cars since both belong to a market segment where purchasing power is still prevailing. Continued new car production issues may reach Thailand as current supply chains for chips, resins and rubber are under global pressure; but mostly exacerbated by the chip production and shortage issues and the Covid pandemic.

Between Wave 2 and 3 of the pandemic, the Thai Government additionally launched an EV (electric vehicle set of goals and assumptions) in March 2021 with anticipated 2035 goals. The plans contain some goals that will create significant change for OEM production and supply chains, but also for the 16M units in current operation in the Thai carpark and the substantial government fleet.

One recommendation from the government is that only EVs are able to be registered by the Land Transport Department and no longer ICE (internal combustion engines) from 2035 onwards. From this the government assumes approximately 7M EV sales between now and 2035, which is a steep goal indeed. This also means that a significant percentage of all new cars will need to be EV’s to achieve these goals, plus a wide range of affordable product choices not currently in the new car market is to become available. Lastly this also assumes affordability of these new EV’s compared to the Thai disposable income and a scrap, salvage and recycling system sufficiently mature to handle significant volumes from 2026 onwards.

In Summary and in short term, used car supply volumes are likely to increase and remain relatively high until scaled vaccinations commence, supply chains gain reestablishment, new car sales gain new found momentum, and the Thai economy recovers. As usual Motto wishes all our partners healthy profitable trading and good health in these times.

Need more information, contact Motto Group at Sales@mottoauction.com