Local Motorcycle Market Shows Worst Performance in a Decade, But Exports Still Flourishing (Business Breif No.2045)

The motorcycle market at home has seen a serious setback this year. The sales volume of motorcycles throughout 2007 is expected to total only 1.7-1.8 million units, down 12-17 percent, over-year. This will be the worst performance in the local motorcycle market in 10 years or since the economic crisis in 1997-1998. It is still unclear if the annual sales will soon reach two million units as seen during the past 2-3 years. KASIKORN RESEARCH CENTER (KResearch) has summarized key factors that have hit the motorcycle market in Thailand in 2007:

1. During the first 7-8 months of this year, several unfavorable factors included economic sluggishness, political uncertainties over the first 7-8 months of this year, delays in the government's projects and a slowdown in budgetary disbursements for provinces, which are the chief market for motorcycles. Over the first eight months of this year, motorcycle sales totaled only 1,122,603 units, a year-on-year decrease of 16.8 percent.

2. The motorcycle market is approaching a saturation point and this is an important fundamental reason affecting the home market after having grown steadily for many years. At present, the ratio of motorcycles to the Thai population is around 1 motorbike to 3-4 persons, having risen rapidly since the last decade when the ratio was only 1:8. This shows that the Thai motorbike market is really reaching saturation, particularly after comparing it with other ASEAN countries, i.e., Indonesia and Vietnam. At present, the motorcycle ratio in Vietnam is 1:6-7 persons, in Indonesia it is 1:10 and in the Philippines, it is around 1:40.

It is worth noting that at present exports of Thai motorcycles and parts is changing in the way that the proportion of CBU (Completely-Built-Up) motorcycles is subsiding against a rising proportion of parts and accessories. The export value of motorcycles' parts in 2006 grew 19.2 percent to USD430.8 million and in the first 7 months of 2007, the value of motorcycle parts kept growing at around 60 percent with a value of USD350.3 million. However in the opposite direction, the export value of motorcycles in 2006 totaled only USD265 million, subsiding 10.6 percent, and in the first 7 months of 2007, the export value was only USD135 million, decreasing 18.6 percent compared with the same period of last year. These changes are caused by the fact that importing countries in Asia, such as Vietnam, Indonesia and the Philippines have developed their own domestic motorcycle industries. Thus, they have reduced their motorcycle CBU imports while increasing imports of motorcycle parts.

With the size of markets and demand for motorcycles in many ASEAN countries, KResearch expects that the ASEAN market will continue to grow over the next 10-20 years. Meanwhile, the production volumes of those countries are not yet sufficient to meet the growing demand. As a result, exports of motorcycles and parts from Thailand for this region will continue to play a vital role and drive domestic motorcycles and parts industry to continue growing even though the domestic market is reaching saturation.