The economic slowdown and price wars between new electric cars from China and gasoline cars have had a significant impact on the used car market in northern Thailand. Many used car dealers in Chiang Mai province have been forced to shut down or reduce their stock due to the challenging economic conditions.
Teerapat Phisut, a used car lot owner in Chiang Mai, expressed his concerns about the current situation, stating that it is the worst time he has seen in his 25 years in the business. Car prices continue to plummet, making it difficult for dealers to sell cars at a profitable price. Banks have become more cautious in approving loans, and fewer people are buying used cars.
To cope with the tough market conditions, car dealers have been resorting to selling cars for less than their market value. Teerapat Phisut himself has had to sell cars at a loss, costing him hundreds of thousands of baht. In an effort to attract customers, dealers have started offering deals such as no down payments, extended guarantees, and 24-hour emergency assistance. Some even provide cash back options for customers with good credit to help them pay their bills.
In an attempt to stimulate sales, salespeople at car lots in northern Thailand have turned to live-streaming their talks and offering various deals, discounts, and after-sales services. Despite these efforts, the market for used cars remains sluggish.
The Chairman of the Chiang Mai Used Car Dealers Association, Mr. Boonthanom Phisut, explained that the current state of the economy and the car business has led to an increase in repossessed vehicles, making it even more challenging for dealers to secure funding. Only one to two out of ten customers pass credit checks, and the constantly fluctuating prices of used cars further complicate the selling process.
The situation in the used car market is worsened by the record-high household debt in Thailand. Krungsri Bank reports that Thai household debt reached 91.3% of GDP in 2024, primarily driven by consumer and home loans. Non-performing loans, including car loans, consumer loans, and home purchases, have also increased significantly.
Thailand’s debt-service coverage ratio (DSCR) stands at 22.3%, much higher than the global average of 9.8%. This places Thailand among the countries with the highest levels of household debt to GDP worldwide. The majority of family debt comes from personal loans and credit card debt, which do not directly contribute to increasing income.
Krungsri Research predicts that household debt will gradually decrease after government and BOT interventions in 2024. However, the debt burden is expected to remain high due to the lack of comprehensive measures addressing the root cause of high debt, which is primarily insufficient income.
As a result of the soaring household debt and the economic challenges faced by consumers, auto loan rejections in Thailand are projected to reach 40%. This further exacerbates the difficulties faced by both car buyers and dealers in the country.
Overall, the combination of a struggling economy, price wars, repossessions, and high household debt has created a daunting environment for used car dealers in northern Thailand. They are forced to adapt their business strategies, including selling cars at lower prices and offering attractive deals, in order to survive in this challenging market.
