EV sales continue to drop driven by tight economic conditions

After getting off to a relatively slow start when they were first introduced, electric vehicles (EVs) have increasingly played a significant role in the Thai automotive market, particularly over the past two years.

Numerous players have entered the market, driven by both domestic and global trends, as well as government incentives. Now, however, the EV market appears to be cooling off.

The Thai automotive industry is facing challenging times, with a continued decline in sales since 2023. From January to May this year, cumulative sales totalled 260,365 units, a 23.8% decrease compared to the same period last year.

“The market slowdown is due to the overall economic conditions, including a slow recovery in consumer confidence and high loan rejection rates from financial institutions,” said Supakorn Rattanawaraha, deputy managing director of Toyota Motor Thailand.

Pongsak Lertrudeewattanavong, deputy managing director of MG Sales (Thailand), agreed, stating that the declining car market can be attributed to three main factors:
The Thai economy, which is closely tied to the global economy, both of which are struggling, leading to reduced consumer demand.

Strict lending practices by financial institutions due to high levels of non-performing loans (NPLs) and household debt over the past two years, affecting consumers’ purchasing power.

The car market is primarily driven by instalment payments, directly impacting the small car and pickup truck market, which are key segments in Thailand.

The continuous downturn in the automotive market has led people to believe that the influx of EVs, particularly from China, has exacerbated the situation. This has been intensified by some manufacturers engaging in price wars, pulling others into the competitive fray.

Analysts argue that the general car market, especially the Japanese car market, which has been under scrutiny following Subaru’s announcement to cease car production in Thailand by the end of this year and Suzuki saying it will pull out by the end of 2025, is not significantly impacted by EVs.

EVs remain a niche market with a small share. The broader car market is more affected by negative factors such as the sluggish economy and the lack of clear, concrete measures from the government to address issues, which has undermined consumer confidence.

Moreover, the tightening of credit by financial institutions, following the rise in household debt and bad debt, has led many to revise their marketing plans and implement stricter customer screening.

This impact is not only seen in conventional cars but also in EVs.

Data from the Department of Land Transport indicate that the EV market has not been particularly strong since the beginning of the year. January recorded the highest number of registrations for the year at 13,321 units, driven partly by a rush to register before the January 31 deadline to qualify for benefits under the EV promotion plan, EV 3.0, which offers a 2% excise tax and a subsidy of up to 150,000 baht.

This rush led to a sharp decline in registrations the following months.

If the cumulative total for the first five months is extrapolated for the entire year, EV sales are expected to be close to 76,000 units, considerably lower than the overall projection of between 100,000 to 130,000 units.

So far the market has not met any of the expectations, with numbers falling short of targets, impacting orders and inventory, and initiating a price war. It is anticipated that the price war may intensify further if the economy does not recover and the automobile market does not improve. New EV models are scheduled for release this year, and new entrants are preparing for official launches.

The ongoing price war not only affects the EV sector but also impacts other types of vehicles, leading to a market slowdown. Many consumers are delaying their EV purchases in the hope of seeing even lower prices, especially those who do not urgently need a new vehicle.

This price war affects dealerships as well. Some companies require dealers to participate in price reduction campaigns on a 50/50 basis. For instance, if there is a discount campaign of 100,000 baht, the company would cover 50,000 baht, and the dealer would cover the remaining 50,000 baht. This has made the situation difficult for some EV dealers, whose main revenue comes from per-unit sales, while they lack income from after-sales services.

Initially, dealers could still manage to make some profit under the 50/50 discount model. However, after several rounds of price reductions, the profit margins set by the parent companies have almost disappeared, and some models no longer generate any profit. This could lead to a restructuring of dealerships, including brand switching, which is easier for EVs compared to conventional vehicles due to fewer after-sales service requirements.

In response to the current competition, Japanese car manufacturers have been relatively passive. While some models had initial price reductions, many manufacturers are avoiding further involvement in the ongoing EV price war to prevent long-term impacts that outweigh short-term gains. They are choosing to remain reserved, with little new product activity, knowing that launching new products in the current climate is challenging.

It will be important to maintain stability and wait for the economy to recover. Since government economic stimulus policies are unclear, and market stimulation has a limited effect, maintaining both manufacturers and financial institutions is crucial. The automotive market follows its own cycle, with consumers eventually purchasing new vehicles, either as additional or replacement units. The key is to wait for naturally occurring demand.

Moreover, in these challenging times, building confidence among both consumers and key partners like dealerships is crucial.