Bangkok--3 Nov--KASIKORN
The automotive industry has slowed, given varied unfavorable domestic factors. However, KASIKORN LEASING bucked the trend, reporting a 2.8-percent increase in 3Q15 new lending and a 1.8-percent decrease in outstanding loans, while posting a net profit of 496 million Baht, up 23.8 percent YoY. Next year's automobile excise tax hike is expected to help boost new car sales and loans within this year-end.
According to Mr. Surat Leelataviwat, KLeasing Managing Director, the weak 2015 auto market is attributable to prudent car loan extension by financial institutions, drought, low farm prices, and high household debt, all of which has curbed overall market spending power. There has been no sign of recovery, although new car models were launched, and prices are to be raised next year. KASIKORN RESEARCH CENTER projects that domestic car sales are likely to contract substantially, by 15 percent to approximately 750,000 units, against last year's 881,883 units. Factors expected to spur the market during the remainder of this year include the year-end motor expo and demand pushed forward by next year's excise tax rate increase for vehicles.
Over the first nine months of this year, KLeasing's cautious move has been in line with market and economic conditions; new loans amounted to 44.97 billion Baht, up 2.82 percent YoY or 1.23 billion Baht. Of the total, hire purchase and financial lease registered 22.03 billion Baht, a decrease of 9.14 percent YoY, while the remaining 22.94 billion Baht was granted under the Auto Dealer Floorplan product, which, in contrast, was up by 17.71 percent.
The company's outstanding balance totaled 86.46 billion Baht, down 1.55 billion Baht or 1.76 percent over-year, while its non-performing loans (NPLs) stood at 1.54 percent. Despite the decrease in outstanding balance, KLeasing's net profit for the third quarter of 2015 equaled 496 million Baht, a growth of 23.79 percent over-year.
Looking ahead, the 2016 auto finance industry will be slow, as weakness persists from 2014 and 2015, which slumped 3 percent and is expected to fall by 2 percent, respectively. The gloomy outlook stems from impacts from the first-car buyer program, which has hindered new car demand due to its five-year holding condition, plus a fragile recovery in the used vehicle market. Deteriorating hire purchase quality has caused a rise in the industry's NPLs from 2.5 percent in 2014 to 2.6 percent as of June 2015, which is considered to be the peak and will either stabilize or decline, given hire purchase providers' recent substantial haircuts. However, poor economic conditions in 2016 may make asset quality a continuing market concern. Moreover, financial institutions remain wary in credit extension amid persistently high levels of household debt. Obviously, the auto finance industry is currently experiencing a long market slump, with no sign of recovery in sight. The market will, therefore, likely stand still or slightly contract within the range of zero to minus 2 percent growth.
Mr. Surat added that market risks will continue to rock the Thai auto industry, despite some positive factors. The government has carried on sustaining domestic spending to tackle the current economic slowdown, and encourage new private and public investment, particularly in target industries of tourism, automobiles, petrochemicals, electronics, IT and foods, which have brighter prospects than others. Other government stimuli are made in target areas, such as special economic zones. This may prop up confidence among financial institutions in their new car lending somewhat, particularly in commercial vehicles which will obtain greater benefit than personal cars. However, the recovery will remain slow due to ongoing risk factors including hire purchase providers' prudence in credit provision, drought which directly affects farmers' income, and rising vehicle prices due to a new excise rate to be implemented next year.
In light of this, KLeasing plans to pursue a proactive strategy of opening new markets or channels for auto financing in 2016, through partnerships with new auto brands recently entering the Thai market. The company also aims to be a captive finance entity for diverse carmakers to strengthen its market status. Special promotional campaigns will be presented to match customer demand, while marketing activities will be jointly organized with KLeasing partners throughout the year. A new digital communication channel, KLeasing on Mobile Application, will be promoted for presentation of the company's new privileges, while simplifying customers' use of auto financial services with easy-to-access information and diverse benefits from business partners.