July 18, 2019 / 5:46 AM / 3 months ago

UPDATE 1-Thai domestic car sales suffer first fall in 2-1/2 years in June

* June sales fall 2.1% y/y, vs +3.7% in May

* FTI keeps sales growth target of +2.4% this year

* Central bank worries about car loans

By Kitiphong Thaichareon and Orathai Sriring

BANGKOK, July 18 (Reuters) - Thailand’s domestic car sales declined for the first time in 30 months in June, as finance firms used stricter lending criteria after the central bank moved to talk down a surge in auto loans amid concern about high household debt.

Sales dropped 2.1% in June from a year earlier after rising 3.7% in May, according to the Federation of Thai Industries (FTI).

Thailand is a regional vehicle production and export base for the world’s top car manufacturers. The industry accounts for one-tenth of the Thai economy, and has been one of a few growth drivers at a time of falling exports.

The FTI attributed the sales contraction to tighter car loan approvals and a high comparative figure last year.

“Finance for car purchases is tougher, with very high rejection rates, particularly for smaller cars,” said Surapong Paisitpattanapong, spokesman of the FTI’s automotive industry division.

“The central bank has talked too often about car loans”.

Car dealers will have to work harder to help clients get loans, or to shift to the high-end market, Surapong said.

Although the Bank of Thailand (BOT) has not taken any policy action, the mere prospect of car loan curbs has been enough to tighten the finance spigot to domestic buyers.

On Wednesday, BOT Governor Veerathai Santiprabhob said the central bank is discussing with banks and non-bank lenders adjusting their lending process to focus on borrowers’ debt-service ratios.

Surapong said the FTI’s 2019 car sales growth target of 2.4% should still be achieved, as it is conservative.

In January-June, sales rose 7.1% from a year earlier, after a 19.5% jump in the whole of 2018, helped by easy auto loans.

Editing by Richard Borsuk

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