Industry Trend Analysis - Improving Business Climate And Infrastructure To Support CV Sales - FEB 2018


BMI View : Thailand ' s improving business environment and pipeline of projects in the energy and utility, construction and transport infrastructure sectors will help drive growth of 4.3% in new commercial vehicle sales in 2018.

We expect Thailand's commercial vehicle (CV) segment to continue on its path of recovery in 2018, with forecast growth of 4.3% in sales, reaching a total of 529,095 units. Breaking this down, light commercial vehicle (LCV) sales will rise 4.4%, while heavy truck sales will expand by 2.0%. As evidence of the CV market's resurgence, total CV sales were up 6.7% y-o-y in the first nine months of 2017. We expect an improving business climate over the coming years and solid infrastructure project pipeline to drive growth in both LCV and heavy trucks in the year ahead. Over our 2018-2021 forecast period, we anticipate average annual growth of 3.5%, with sales reaching close to 600,000 units by the end of 2021.

Sales To Continue Ticking Upwards
Thailand - Commercial Vehicle Sales Forecasts By Segment, Units, % chg y-o-y
f = BMI forecast. Source: Federation Of Thai Industries, BMI

Improving Business Environment To Support LCV Sales

We expect continued improvements in Thailand's business environment to help support growth in the LCV segment. Our Country Risk team believes that the country's new constitution will allow for policy continuity and continued improvements in business sentiment ( see ' Business Environment Reforms To Support Productivity Growth ' , November 20), which is reflected in their forecasts for fixed capital formation - a useful proxy of total business investment - to grow at a steady annual average rate of 3.4% between 2018 and 2021. We therefore expect this rise in capital expenditure by businesses to translate into new purchases of LCVs which will be required to meet operational activities.

Growth In Business Investment Bodes Well For LCV Sales
Thailand - Fixed Investment Growth & LCV Sales Growth Forecasts,% chg y-o-y
f = BMI forecast. Source: National sources, BMI

Infrastructure Pipeline To Bolster Truck Sales

For the heavy truck segment, we expect Thailand's robust infrastructure pipeline to drive demand for heavy duty vehicles. Our Infrastructure team expects a more positive economic outlook and steady progress on infrastructure development plans to drive real growth of 5.0% in Thailand's construction sector in 2018 and annual average real growth of 5.0% over 2018-2021 ( see ' Residential, Commercial Building Investment To Remain Strong ' , July 27).

According to BMI's Infrastructure Key Projects Database - a comprehensive catalogue of construction projects taking place within the country - there are currently nine infrastructure projects at the planning stage in Thailand across the energy and utilities, construction and transport sectors that are set to be completed by the end of our 2018-2021 forecast period. We believe this construction activity will help drive demand for heavy trucks as they are better suited to meet the logistical requirements for these infrastructure projects.