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Promotions ward off slump in Thailand auto sales

BANGKOK--The Thai automobile market is expected to finish the year at 1.3 million units sold, slightly down from last year's record 1.4 million.

Despite the small difference in volume, automakers have been working much harder to maintain the sales momentum that was dramatically boosted by the government's first-car-buyer scheme that ended last year. The program offered tax rebates of up to 100,000 baht (US$3,000) for buyers of vehicles that qualified, allowing manufacturers to enjoy steep increases in sales and making it easier for consumers to purchase vehicles.

However, many say that the populist scheme stole its success from future demand while also attracting consumers who were not financially ready to purchase a vehicle.

According to the Automotive Industry Club of the Federation of Thai Industries, as many as 150,000 people who placed orders under the program never turned up to pick up their vehicles. This caused problems for the auto industry, particularly dealerships, which need to clear inventory to maintain cash flow.

Nevertheless, auto companies tackled the situation by offering support to the dealerships, as well as designing sales offers that were superior to the first-car promotion. This is seen as the most important reason that the auto market did not plunge as much as feared. By mid-November, 132,000 customers had decided to cancel the orders they had placed under the first-car scheme as promotions offered by auto companies were superior.

“Last year was a golden year for automobile companies as everyone rushed to place orders because of the first-car-buyer program, but after it ended demand fell significantly and it was much more difficult to sell cars. The market has become even more competitive and everyone needs to offer very attractive campaigns to clear out stocks,” said a major auto-company executive.

Attractive promotions are expected to remain until mid-2014 though total inventory has been lowered to about 60,000 units, compared with more than 100,000 during the earlier part of this year. At the recently concluded Thailand International Motor Expo, more than 40,000 orders were placed, thanks to the highly attractive sales campaigns offered by auto companies.

Many are waiting for December auto-production figures to be released, but it is pretty certain that the 2.55-million-unit sales target will not be achieved.

“If production in December reaches 200,000 units, then the Thai auto industry will have produced 2.5 million units in 2013. But certainly the 2.55-million target will be impossible,” said Surapong Paisit-patanapong, spokesman for the Auto Industry Group.

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