Mr. Sasawat Virapriya, KLeasing Executive Chairman, has said that the company's total loans during 1H17 equaled THB40.84 billion. New hire purchase/leasing and car registration loans totaled THB18.72 billion, rising 6.55 percent YoY, compared to the 4.5 percent growth in hire purchase loans of the overall commercial bank system. As for KLeasing floorplan loans, they amounted to THB22.12 billion. With outstanding loans rising 4.08 percent YoY to THB92.99 billion, and NPLs of only 1.50 percent – a decrease from last year's 1.54 percent – 1H17 profit rose 71.8 percent YoY to THB576 million.
Overall, hire purchase auto loans are expected to maintain satisfactory growth during 2H17, thanks largely to brighter new car sales. As a result, net loans for 2017 are projected to grow at least 5.0 percent YoY, versus a previous projection of 3 percent, and also higher than the 1-percent average growth seen in the past couple of years.
According to KResearch, debt quality in the auto hire purchase segment deserves close watch. During 2Q17, auto hire purchase NPLs climbed to 1.66 percent of the total, from 1.63 percent at the end of 1Q17. Likewise, 'special-mention' loans were also on the rise. The data indicates that debt quality remains a concern, especially amid numerous economic downsides, e.g., household debt that may still be pressuring consumer purchasing power and debt servicing ability.
In 1H17, domestic car sales totaled 409,950 units, increasing 10.7 percent YoY, thanks to a steady recovery in the Thai auto market since the beginning of 2017, plus the fact that the market has responded well to new car models. It is expected that carmakers will continue to debut new models during 2H17 when the economy is expected to pick up on improving tourism and exports. Now that many vehicles bought using the First-Time Car Buyer Program are permitted to be sold in the market, this should also increase new and used car demand.
During 2H17, KResearch projects that domestic car sales will increase to approximately 410,000-430,000 units, rising 2-7 percent YoY, thus bringing total car sales for 2017 to perhaps 820,000-840,000 units, increasing 6-9 percent YoY. The uplift should be supported by favorable GDP growth and government stimuli aimed at promoting private investment. Although the excise tax assessment method has been changed, most carmakers will unlikely adjust their car prices in 2017 to ensure that consumers remain interested in the affected models during 2017. To attract buyers, they may introduce new incentives offering premiums and car guarantee options.
Meanwhile, the used car market will likely face heightened competition from the introduction of new car models, in particular passenger cars, though pickup trucks may be affected less because few new pickup truck models are being introduced. With more first-time car buyer program autos entering the used car market, the prices of second-hand vehicles may not increase much overall.
Mr. Sasawat concluded that the car market overall will continue to grow in 2017. Almost every category of passenger vehicles will likely enjoy steady growth, particularly small cars (eco-cars and B-segment), as well as family-friendly MPVs and luxury cars since many new models will be launched this year. Regarding the commercial vehicle category, it is expected that four-door pickups will continue to sell well because prospective buyers tend to be high-income earners. Ten-ton trucks should also see good prospects due to higher prices for some farm produce and an expanding transport sector, along with growth in online business that has created demand for delivery vehicles. However, the market for pickup passenger vehicles (PPV) that has seen high growth in the past couple of years may experience slower growth now due to a high base effect. In addition, PPVs will become more expensive after revisions in the excise tax. Further, PPV market growth is being challenged by strong competition from a variety of newly-introduced MPVs, although some of these vehicles – such as SUVs – are smaller than PPVs.