Household ownership of a passenger car in Thailand is less than 10% until annual disposable income exceeds US$10,000. Euromonitor’s forecast for these households suggests that light vehicle sales will not return to the level of 2012, when demand was stimulated by a tax rebate for first-time car buyers, until 2020.
The percentage of households which possess a passenger car in Thailand remains below 10% until decile 7, which translates into average annual household income of US$10,245. Unsurprisingly, ownership rates take off from that point, climbing to over 20% for income decile 8 and 38% and 64% for income deciles 9 and 10 respectively.
Possession of a passenger car, % of households, and average annual disposable income, US$, by income decile, 2013
Source: Euromonitor International
Taking this US$10,000 annual disposable income level as the jumping-off point for vehicle ownership also ties in with light vehicle sales in the country which have equated to more than 10% of the number of homes with annual disposable income over US$10,000 since 2003 – with the exception of 2007-9. In 2012, however, light vehicle sales boomed as a result of a tax rebate for first-time car buyers, growing by over 80% to just shy of 1.4 million units. This equates to 18% of households with annual disposable income over US$10,000 and almost 10% of households with annual disposable income over just US$5,000. Moreover, it implies that the market was inflated by more than 500,000 units in 2012, even factoring in any pent-up demand that accumulated in 2011 as a result of the floods that struck the country.
Light vehicle sales, millions, 1998-2012, and millions of households by selected annual disposable income level, 1998-2020
Source: Euromonitor International, JATO
Although many of these new vehicle purchases may not have been made at all without the tax rebate, many others would have been simply brought forward. There will therefore inevitably be significant payback in 2013 once all the orders are fulfilled that were placed before the scheme expired at the end of December. In fact, in the absence of any further incentives or permanent change to the vehicle duty regime, Euromonitor’s forecast for household incomes in Thailand suggests that even an optimistic outlook would not see the market return to the 2012 level again before 2020.