MOTTO AUCTION

Supply of Used Cars is Slowly Recovering amid Demand Contraction.

Thailand’s used car industry is moving on a challenging path again. After the Covid-19 outbreak in March 2020, the used car supply increased by 71% driven by the increase in NPLs (Non-Performing Loans) and the market demand also increased by 68% due to the rise for a cheaper alternative from the new car market. Since H2 2020, the BOT introduced various debt relief measures and payment moratoriums into the market. The measures have been quite effective, successfully reducing the supply of used cars from June 2020 to March 2021. However, the impact of the recent Covid-19 wave 3 seems more severe and has erased the benefits from any relief measure. The spread of delta variant not only interrupted supply chain of new car production but also led to lockdown in 29 provinces in Thailand causing job loss and serious debt issues. The number of unemployment in Q2 2021 is about 3 million and projected to reach 3.4 million by the end of 2021. Many auto hire purchase loaners failed to pay their car loan installments but over the past 2 months an increasing trend has been an increase in car repossession difficulty, especially in the dark-red zone provinces (high Covid-19 infection rates). Contrastingly, demand for used cars has become tight as the sales index remains at 85.5. Failure of vaccine procurement and poor crisis management has urged consumers to be less confident and delay their expenses on expensive purchase items.

Drop of Used Car Prices. It is a Good Time to Shop.

Though the used car market is currently facing unfavorable economic circumstances, the dropping price trend is attractive for consumers who still have purchasing power. The fact that the used car supply continues to move below the 100 index (YoY) since July 2020 while prices are tracking in a dropping curve since May 2021 indicates that such a drop is caused by the Wave 3 of Covid-19 whose effects fall more on reduced demand and purchasing power. The consumer confidence index that continues to reach new lows (from 43.1 in June to 40.9 in July 2021) is obvious evidence. Household debt is moving up to 93% in July 2021 and purchasing power of consumers declines in general. This has forced many dealers to delay sourcing and purchasing of new stock and to focus more on launching promotion campaigns to reduce their current stock. One interesting occurrence has arisen during this 3rd Covid wave is that since June and July 2021, quantity of European car increased by 49% and 24% respectively while price decreased about 15% on average. During this low-priced stage, it would be a good opportunity for anyone who wishes to purchase an inexpensive, quality European car.