VietNamNet Bridge - As some South Asian markets have seen considerable decline, foreign investors are heading for other ASEAN markets, including Vietnam and the Philippines.

The Federation of Thai Industries (FTI) reported that only 881,800 cars were sold in 2014, a sharp decrease of 34 percent compared with sales in 2013.

This was the first consecutive year Thailand saw car sales drop. The lower demand has forced automobile manufacturers in Thailand to scale down their production with 1.88 million cars made in 2014.

The sharp sales fall in Thailand was attributed to the ending of the program on supporting first-time car buyers. 

Meanwhile, the banks in the country have tightened lending to fund car purchases after the warning about the increase in the number of non-performing loans.

The sales decrease has also been seen in Indonesia which has led to a drop in production capacity from 1.4 million to 1.3 million cars.

The demand in the country has fallen slightly because the Indonesian government has removed the petroleum subsidy and tightened control over lending.

Thailand and Indonesia were once favorite destination points for foreign automobile manufacturers. However, new conditions in the countries have made them less attractive for investors.

An analyst said that automobile factories in Thailand were now running at full capacity, which means that manufacturers will have to make new investments to raise capacity.

However, there are many factors that have made investors hesitant. The political uncertainties in Thailand have been affecting business, while higher labor costs have led to higher production costs.

Investors have made heavy investment in Indonesia, and they are now looking for other places to invest to disperse risks.

The analyst said foreign automobile groups still want to increase their production capacity in South East Asia because they can see the great potential of the market.

It is estimated that the ASEAN automobile market would need 4.7 million cars by 2018 and 8 million by 2030. Factories can now churn out 5 million, which is not enough for the future.

Vietnam and the Philippines, with population of 90 million and 98 million, respectively, are believed to be the two destination points worthy of consideration.

An economist said market scale would be the most important factor that investors consider.

Automobile demand in Vietnam is expected to boom after 2020, when Vietnamese income per capita is expected to exceed $3,000.

There are now 2 million cars in Vietnam and car sales per head remains low. However, the consumption level may exceed 1 million cars per annum by 2030.

Tran Thuy