THAILAND INDUSTRY OUTLOOK 2017-19

MOTORCYCLE INDUSTRY
September 2017
Wanna Yongpisanphob
wanna.yongpisanphob@krungsri.com
+662 296 4755

 Demand for motorcycles is forecast to grow in line with a growing economy over the period 2017-2019, supported
by improving incomes for the agricultural sector and anticipated spending on electoral campaigns in 2018. The
outlook for manufacturers and distributors of motorcycles is therefore positive, although distributors which offer
hire-purchase financing may be at risk of defaults, as household debt remains high.
 Exports of motorcycles (which account for around 15% of all domestic output) are also expected to return to
growth on signs of strengthening economies in major trade partners, such as Europe and the United States.
Exporters may also benefit from a rush to import into the United States caused by uncertainty over the new
administration’s policy on free trade and the possibility of higher tariffs on imports. Exports of ‘big bikes’ should
also see solid growth following the decision of major global manufacturers to open production facilities in
Thailand.

 Overview
Thailand is the world’s 5th biggest producer of motorcycles, Figure 1: Thai Motorcycle Domestic Sales and Exports
sitting behind China, India, Indonesia and Vietnam 1/. The industry
has developed thanks to major manufacturers, especially those from
100%
Japan, investing in factories in Thailand to set up production base for
80%
exports. In fact, the motorcycle sector dates back to 1967, although at
60%
first production consisted largely of re-assembling ‘knocked down’
40%
motorcycles (referred to as completely knocked-down units, or CKD)
20%
for sale on the domestic market. Over time, however, the sector
0%
developed so that domestically produced parts gradually replaced
2005

2006
2007
2008
2009
2010
2011
2012

2013
2014
2015
2016
imported ones. The specification of local content requirements (i.e.
the proportion of parts in finished goods which are to be produced in Domestic sales Exports
Source : FTI
domestic facilities) and the commencement of ‘big bike’ production in
the year 2000 have also helped to spur the expansion of Thai
motorcycle production such that now, this and continuous
development of the sector by motorcycle manufacturers in Thailand Figure 2: Thai Motorcycle Production by Segment
have together led to a significant increase in the value of goods
‘000 units
exported back to Japan. In 2016, 12.6% of the total value of imports of
2,400
motorcycles to Japan came from Thailand, up from just 2.2% a decade 2,000
earlier. 1,600
Currently, motorcycles produced in Thailand may be divided into 1,200
800
four categories: (i) lightweight (50-250cc engine capacity), (ii)
400
middleweight (251-500cc), (iii) heavyweight (501-800cc), and (iv) 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

super heavyweight (801cc and over). However, most production is of

lightweight family and automatic motorcycles 2/, which take 85% of
Moped* Sport**
domestic production, and most production (another 85%) is for this
Source : FTI
domestic market. Models with engine capacities over 250cc therefore Note: * Mopeds are motorcycles suitable for family use for travel over short distances.
They typically have an engine capacity of less than 135 cc
represent only a small fraction of the total output. ** Sports motorcycles are similar to racing motorcycles and usually have large
engine capacities.

1/ In 2015, China led world production with a total output of 18.8 million
motorcycles. This was followed by India with 18.5 million, Indonesia with 5.7 million,
Vietnam with 3.1 million, and Thailand with 1.8 million (Source: Speeda, CAAM, FTI).
2/ Most production is of 4-stroke models; since 2002, the Thai government has
supported a move away from 2-stroke engines in order to reduce pollution from
exhaust gases. Krungsri Research 1
 Thailand Industry Outlook 2017-19 Motorcycle Industry

Figure 3: Percentage of households with a motorcycle/scooter (2014)

Percentage of households that

have a motorcycle/scooter by
selected countries
> 80%
66-80%
45-65%
36-45%
26-35%
16-25%
5-15%
No data

Source: Statista, Krungsri Research

Over the past decade, the Thai motorcycle sector has seen a fluctuation in the health of both domestic and export
markets and this has led to pauses in investment.
 Domestic market: This has been subject to fluctuations in its strength as a result of economic problems triggered by
domestic political upheavals. This has then had effects on the purchasing power of laborers and those in the agricultural
sector, who comprise the main customers for motorcycle manufacturers. In addition, the domestic market is close to
saturation; per household, Thailand has one of the highest levels of penetration rate of motorcycle in the world (over
80%) and this means that continuing to expand the market over the long-term may be difficult (Figure 3).
 Export market: Growth in this market is limited by the ability of importing countries to manufacture their own
motorcycles, particularly in the case of Indonesia and Vietnam, which had imported lightweight motorcycles (50-250cc)
from Thailand. Over the last 10 years, however, exports by Thai motorcycle manufacturers have fallen and Thailand has
lost market share, especially to the two aforementioned countries, which have both benefited from large motorcycle
producers looking for new, low-cost production centers. As a consequence of this, the motorcycle sectors in these two
countries have seen sudden and dramatic expansions. In the case of Vietnam, total production capacity for 2015 came to
4 million vehicles and over only 4-5 years 3/, the country has been able to establish itself in the top 5 world producers.
(Source: Office for International Trade Development, Hanoi).
These developments in export markets have prompted motorcycle manufacturers in Thailand to develop the sector in
supply chain and to shift the emphasis from ‘completely built-up’ (CBU) lightweight models to the export of disassembled
CKD products for assembly in production centers elsewhere in the region. In addition, attention has been given to
attracting investment for the development of production facilities for models with engine capacities of 248cc and over
(i.e. ‘big bikes’) with the intention that these then be exported 4/. Since 2013, it has been clear that this has led to a
significant increase in the proportion of larger models going overseas. On top of this, the markets for CBU exports have
shifted from the ASEAN zone to the European Union and the United States. In 2016, in terms of the value of CBU exports,
the biggest markets for Thai manufacturers were the EU (37%), ASEAN (19%), the United States (19%), and Japan (6%), while
the majority of CKD exports (71% by value) went to other countries in the ASEAN zone.

3/ In 2015, 2.9 million motorcycles were sold in Vietnam so the majority of this production is for the domestic market.
4/ During the initial attempts to attract investment for ‘big bikes’, the government restricted its policies to models with
a capacity of 500cc and over (i.e. heavyweight and super heavyweight models). Unfortunately, this met with only
limited success so from 2012, the government extended their policies to include middleweight models (248cc and
over) too and following this, foreign manufacturers increasingly invested in production centers in Thailand. Krungsri Research 2
 Thailand Industry Outlook 2017-19 Motorcycle Industry

In 2016, Thailand was home to 10 motorcycle production centers Figure 4: Motorcycle Manufacturers in Thailand

(Figure 4), which manufactured under 12 brands and had a total Capacity: Units per year
production capacity of 3.5 million units per year 5/. The biggest  Location: Pathumtani
550,000 units
manufacturers were the major Japanese players (Honda, Yamaha,
 Location: Bangkok
Suzuki, and Kawasaki), which produced both lightweight models and 1,700,000 units
‘big bikes’. This is with the exception of Yamaha, which, leveraging 40,000 units

the advantages of the JTEPA partnership, imports all big bikes from  Location: Chachoengsao,
Phetchaburi  Location: Chonburi
Japan. One Taiwanese corporation, M Bike Motor Sales, produces 54,000 units
Total
lightweight models under the SYM brand and ‘big bikes’ under the 60,000 units 20,000 units

Benelli and Keeway brands. The remaining companies can be split

into (i) the two lightweight manufactures, Ryuka (Chinese) and GPX  Location: Samut Prakarn  Location: Rayong

260,000 units
(Thai) and (ii) the three ‘big bike’ Europeans producers, Triumph 600,000 units
10,000 units
(British), BMW (Germany), and Ducati (Italy).
17,000 units

Source: Krungsri Research

 Situation
As has been shown above, the Thai motorcycle sector is largely Figure 5: New Motorcycle Registrations by Segment
dependent on the domestic market and this is subject to ‘000 units

instabilities. In the years 2011-2013, domestic sales of motorcycles 2,000

were consistently at high levels, hitting a historical high of 2.13 1,600

1,200
million units in 2012. This was a result of improving consumer
800
spending power which was buoyed by the populist policies, 400
particularly the rice pledging scheme and other government support 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

2015
2016
for the agricultural sector, and a general upward trend in commodity
prices on world markets which helped to improve prices for Motorcycle engine < 150 cc Motorcycle engine > 151 cc

agricultural products. These positive factors caused a noticeable Source : DLT

increase in the number of new motorcycles being sold in the

Figure 6: New Motorcycle Registrations by Region
provinces, as can be seen in the number of new registrations during
this period (Figure 6). Excluding the Bangkok Metropolitan Region ‘000 units
2,000 BMR Others
(Bangkok and the provinces of Nonthaburi, Patum Thani, Samut
1,600
Prakan, Samut Sakhon and Nakhon Pathom), new registrations rose
1,200
to an annual average of 1.7 million units for 2011-2013, compared to
800
1.4 million for the years 2008-2010.
400
However, in 2014-2015, the market entered a period of 0
2008

2009

2010

2011

2012

2013

2014

2015

2016

sluggishness, as sales fell back to an average of 1.67 million units and

provincial registrations sank to an average of 1.37 million vehicles. Source: DLT
Note: Bangkok Metropolitan Region (BMR) consists of Bangkok,
This was a consequence of low farm prices and the severe drought, Nakhon Pathom, Nonthaburi, Pathum Thani, Samutprakan and Samut
Sakhon
which eroded consumer spending power in the upcountry. In
addition, ongoing political troubles slowed government activity, Figure 7: Domestic Market Share (%)
especially the disbursement of funds to the provinces and this helped
Brand 2013 2014 2015 2016
to pull down the economy. In particular, spending at the lower-end of
Honda 74.15 74.16 74.59 78.64
the market, the target of much of the output of motorcycle Yamaha 19.04 13.02 12.57 14.14
manufacturers, was affected since this segment is especially sensitive Suzuki 2.58 2.35 1.78 1.35
Kawasaki 2.28 1.98 1.46 1.36
to changes in the economy. Others 1.95 3.63 9.59 4.51
Total 100.00 100.00 100.00 100.00
5/ The total has been calculated from company announcements regarding investments in Source: DLT
manufacturing capacity.
6/ Data on motorcycle registrations from the Department of Land Transport has been used to
estimate sales by province because the actual sales figures for the provinces are unavailable.

Krungsri Research 3
 Thailand Industry Outlook 2017-19 Motorcycle Industry

2016, however, signs of recovery became evident, supported by: Figure 8: Value of Motorcycle (CBU) Imports
(i) an improving economy, helped by increasing government Million USD
investment; (ii) improving farm prices and increasing yields as the 100% 240

Millions
80% 200
drought abated through the second half of the year, which helped 160
60%
to strengthen purchasing power in the provinces; and (iii) moves by 120
40%
manufacturers to release new models and to develop new 80
20% 40
marketing strategies (including waiving down-payments on 0% 0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
purchases and extending repayment periods for hire-purchase
agreements). However, household debt remains high and lenders
Others (LHS) > 800 cc. (LHS)
are tightening loans for smaller purchases and this impacted sales 501-800 cc. (LHS) 251-500 cc. (LHS)
for 2016, which expanded 4.86% YoY to 1.72 million units. For the 50-250 cc. (LHS) < 50 cc. (LHS)
Motorcycle imports (RHS)
year, Honda was the market leader, with a market share of 78.6%,
followed by Yamaha, with a 14.1% market share. Source: Trade map, MOC

Imports of motorcycles to Thailand are still largely restricted to

niche markets and represent only a small proportion of the total Figure 9: Value of Motorcycle (CBU) Exports
sector. Imports are principally of models with engine capacities of Million USD
100% 1,400
over 500cc, since prior to 2008, no motorcycles of this size were

Millions
80% 1,200
1,000
manufactured in Thailand and so these had to be imported, mostly 60% 800
from Japan (by value, 90% of motorcycle imports originated in 40% 600
400
Japan). Following 2008, the situation changed with the 20%
200
establishment of factories in Thailand which are able to produce ‘big 0% 0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
bikes’ and so the proportion of imports coming from Japan has
steadily lessened following. At the same time, there has been a Others (LHS) > 800 cc. (LHS)
501-800 cc. (LHS) 251-500 cc. (LHS)
significant uptick in the import of lightweight models, especially
50-250 cc. (LHS) < 50 cc. (LHS)
from Vietnam and Indonesia 7/ such that in 2016, the total value of Motorcycle exports (RHS)
motorcycle imports came to USD 180.5 m, of which 65% came Source: Trade map, MOC

from Vietnam and Indonesia and only 16% came from Japan.
Exports of CBU products fell 14.5% YoY to 300,000 units in 2016, Figure 10: Motorcycle Exports by Type
with a total value of USD 1.09 bn (-1.4% YoY). This was driven by a CBU CKD Total
Year (Completely Built Up) (Completely Knocked Down) (CBU & CKD)
fall in exports of lightweight models, which had a combined value Units USD, m Set USD, m USD, m Growth (%)
2010 155,688 544.7 660,739 91.3 636.0 11.2
for the year of USD 437.6 m, down 6.8% YoY. The main export
2011 221,164 628.9 911,838 193.5 822.4 29.3
markets for this segment are now Myanmar, Cambodia and Laos 2012 313,991 980.0 542,944 169.7 1,149.7 39.8
PDR, which took 40% by value of all of these exports. Exports of 2013 333,780 1,247.7 601,967 181.8 1,429.5 24.3
2014 288,527 1,063.6 599,453 118.9 1,182.5 -17.3
models with engine capacities over 250cc moved in the opposite 2015 349,878 1,100.9 590,102 87.9 1,188.8 -16.8
direction, growing 7.3% YoY to a total value of USD 766.5 m. Here, 2016 299,026 1,085.4 625,891 125.2 1,210.6 2.4
Asean (19.1%) Asean (71.1%) Asean (24.5%)
exports went to the United States (21% of the total by value), Britain Export Japan (6.3%) Japan (2.2%) Japan (5.9%)
Market
(21%), and the Netherlands (16%). Exports of CKD units also grew, Share (%)
USA (18.6%) USA (0.2%) USA (16.7%)
2016 EU (36.9%) EU (0.5%) EU (33.1%)
rising to 630,000 units, up 6.1% YoY. In terms of value, these Others(19.1%) Others(26.0%) Others(19.8%)

exports were worth USD 125.2 m, up 42.5% YoY. CKD units went Source: MOC, FTI

largely to Japan and the ASEAN zone, which by value together took
73% of the total. This is because Japanese manufacturers use Figure 11: Thailand Motorcycle Export Destinations
Thailand to host factories from where they can then take advantage 2015 2016
of the low customs and tariffs of, for example, the ASEAN Free Others
ASEAN
Others
17.1% Australia 14.6% 19.1%
Trade Area (AFTA) and the Japan-Thailand Economic Partnership Australia
ASEAN
21.7% 4.5%
4.1% Japan
Agreement (JTEPA) to distribute goods for re-assembly in other Japan
USA
6.3%
USA 5.4%
factories in the region. 17.3% 18.6% EU 36.9%
EU 34.4%

7/ This is a result of policies to spread production base of motorcycle through the

ASEAN region, which means that some models are imported into Thailand. Examples Source: MOC
include the Exciter, R15, R3, MT-03, Nmax, and Spark models.

Krungsri Research 4
 Thailand Industry Outlook 2017-19 Motorcycle Industry

 Outlook
Production of motorcycles is expected to see constant growth Figure 12: Production and Sales Forecasts
over the next three years. In 2017, growth of 3-5%, or 1.87-1.91 Mn. units 1.95-2.0
million units, is expected. For 2018, total output should be in the 3.0 1.93-1.96
2.61 1.87-1.91
2.31 2.04 2.22
range 1.93-1.96 million units and in 2019, production is forecast to 2.5 2.08 1.91 1.84
2.0 2.02 1.81 1.82
be 1.95-2.0 million units. These figures would represent growth of 1.65 1.63
1.5
2-4% YoY and 0-3% YoY, respectively with this growth being
1.0
helped by conditions of domestic and export markets. 0.5
0.0
 In line with increasing production, the domestic market for

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017F
2018F
2019F
motorcycles is also expected to strengthen on the back of a
Export sales Domestic sales Car production
recovering economic situation. For 2017, sales are forecast to
grow 2-4% YoY to 1.75-1.79 million units. This growth is 2016 2017F 2018F 2019F
units, m 1.82 1.87-1.91 1.93-1.96 1.95-2.00
Production
underpinned by (i) improving farm incomes, thanks to a slight % YoY 0.7% 3-5% 2-4% 0-3%
Domestic units, m 1.72 1.75-1.79 1.82-1.86 1.84-1.90
improvement in the prices for farm goods and rising yields as Sales % YoY 4.9% 2-4% 3-5% 0-3%
units, m 0.30 0.31-0.32 0.30-0.31 0.31-0.32
the effects of drought fade and the weather returns to more Exports
% YoY -14.5% 5-8% -3% to 0% 1-3%
normal conditions, and (ii) an improvement in the economy Source: FTI, forecast by Krungsri Research

more generally. In 2018, sales should pick up further, helped

by increased spending on campaigning in the run up to an
election, which is expected in the latter half of the year. The forecast is thus for a total of 1.82-1.86 million
motorcycles to be distributed in the year, an expansion of 3-5% YoY. However, continuing high levels of household
debt will place a ceiling on demand and so for 2019, the expectation is that sales will grow at the slower rate of 0-
3% YoY to 1.84-1.90 million units. Competition in the domestic market will remain fierce, fueled by both domestic
production and imports from ASEAN (largely of lightweight models) and China 8/.
 It is expected that in 2017, exports of CBU units will grow by 5-8% YoY to 310,000-320,000 units, driven by
economic recovery in Europe and the United States, the main markets for larger models. Additionally, distributors in
the United States are likely to rush through imports for fear that the new administration may increase trade
protectionism and tariffs, thus potentially pushing up their costs. However, a surge in imports will effectively bring
forward imports from later years 9/ and as a result, it is expected that exports to the United States in 2018 will
shrink by -0-3% YoY to 300,000-310,000 units. In 2019, the volume of exports should bounce back with growth of
1-3% (or a total of 310,000-320,000 units) helped by an expanding global economy. In addition, by the end of 2018,
the new Thai Harley Davidson production facility will come on-stream and so exports of the globally famous brand
should begin in 2019. In addition to this, exports of CKD units are forecast to grow for the next 3 years due to
continuing demand in Japan and the ASEAN region.

8/ The majority of these imports are of electric motorcycles.

9/ The value of exports of assembled motorcycles to the United States from Thailand for
1H17 was USD121mn., up 24.5% YoY.
Krungsri Research 5
 Thailand Industry Outlook 2017-19 Motorcycle Industry

 Krungsri Research view: Both manufacturers and distributors will see improving income but the latter group may
face problems arising from strong competition and exposure to bad debts due to high overall levels of indebtedness.
 Motorcycle manufacturers: Turnover will remain healthy with production rising to around 2 million units per year.
The market will be helped by both domestic and export markets benefiting from improving economies. In addition,
should an election be held in 2018, electioneering in the provinces will draw in extra spending, while strengthening
economies in export markets will support sales there.
 Motorcycles dealerships: Income for distributors will tend to rise alongside rising sales, although the principal
domestic market for motorcycles, low- to middle-income wage earners, laborers, and those in the agricultural sector, is
saddled with high levels of debt and so there exists some risk of default. In addition, competition is expected to multiply,
particularly on price and on interest rates for hire-purchase financing and these factors will tend to push down profits to
lower levels. On the other hand, dealerships of big bikes, which are targeted at a wealthier segment of the market, face
lower risks from bad debts and the outlook for these retailers is good, supported as they are by a customer base which
has greater purchasing power and which is less exposed to changes in the economic outlook.

Krungsri Research 6
KRUNGSRI RESEARCH

Somprawin Manprasert, Ph.D. Head of Research Division and Chief Economist

Phornphan Phoksuphat Head of Macroeconomic and Industry Research

Macroeconomic Team
 Sarun Sunansathaporn Head of Strategic Economics
 Sujit Chaivichayachat Head of Forecasting and Macroprudential Economics
 Churailuk Pholsri Senior Economist
 Soison Lohsuwannakul Senior Economist (Regional Economics)
 Kongphop Wongkaew Economist
 Tanaporn Sriklay Economist

Industry Team
 Chetchuda Chuasuwan Head of Agricultural and Industrial Sectors
 Taned Mahattanalai Head of Service and Real Estate Sectors
 Poonsuk Ninkitsaranont Senior Analyst (Healthcare, Modern Trade)
 Piyanuch Sathapongpakdee Senior Analyst (Industry Risk Ratings)
 Jumpon Kluaymai-ngarm, Ph.D. Senior Analyst (Transportation & Logistics, ICT)
 Narin Tunpaiboon Senior Analyst (Power Generation, Biofuel, Chemical & Plastic Products)
 Talublugkhana Thanadhidhasuwanna Senior Analyst (Financial Sectors)
 Puttachard Lunkam Analyst (Tourism Sectors, Real Estate in Upcountry)
 Niratsai Toomwongsa Analyst (Construction Contractor, Construction Materials)
 Wanna Yongpisanphob Analyst (Automobile, Electronics & Electrical Appliances, Beverages)
 Patchara Klinchuanchun Analyst (Real Estate in BMR)
 Rachot Liengchan Analyst (Oil & Gas, Petrochemicals, Industry Scenario Analysis)

Intelligence Team
 Arpakorn Nopparattayaporn Analyst

MIS and Reporting Team

 Suratchanee Somprasong Administrator
 Thamon Sernsuksakul Administrator
 Chirdsak Srichaiton MIS Officer
 Wongsagon Keawuttung MIS Officer

For research subscription, contact krungsri.research@krungsri.com

Disclaimer
This document is based on public information believed to be reliable. Nevertheless, Krungsri Research would not affirm the accuracy and completeness of this
information. The opinions expressed in this document are our own, which are not necessarily the opinions of Bank of Ayudhya.
We reserve the right to change opinions or forecast without prior notice.

Krungsri Research 7