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6 Jan 2021

Econ Digest

Auto hire purchase loans in 2021 are expected to recover in line with new car sales

       The auto hire purchase industry is another area that has been affected by the COVID-19 pandemic. The outstanding balance of auto loans in the commercial banking system at the end of 3Q20 had grown at a slower pace of 3.5 percent. The slowdown resulted from a decrease in newly approved credit and a decline in domestic sales of new cars to 530,000 units, as well as more captive finance companies entering the market.

 

        The economy is set to gradually recover through stimulus packages to boost domestic spending and restore confidence towards COVID-19 prevention and control measures in Thailand. As a result, demand for new cars and granting of new auto loans over the remaining period of this year will likely see improvement. KResearch projects that, by the end of 2020, the outstanding balance for auto loans of Thai commercial banks will grow by 3.7 percent YoY, amounting to THB 1.194 trillion, slowed down from7.7 percent YoY growth in 2019.

 

            Regarding 2021, if the economy grows as expected and no severe outbreak of COVID-19 happens, auto loans of Thai commercial banks will likely witness an accelerated growth rate of approximately 3.7–4.5 percent. This projection, however, is accompanied by mounting concerns regarding asset quality amid debtors' income and purchasing power that have yet to return to their pre-COVID-19 levels. For this reason, the auto hire purchase industry may not experience growth approaching pre-COVID-19 levels for the next two to three years.

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Econ Digest