Ninnart said he does not expect the general election, which may be delayed from the provisional date of October 15, to help bolster sales as it did last time, as this time round the political parties have small budgets.

"They do not want to spend large sums on the election because the incoming government will serve only for one year to amend the Constitution," he said.

He said the political uncertainty has weakened business and consumer confidence, causing a reduction in spending. Rising oil prices, which have risen 50 per cent over the year to Bt29 per litre, have also lessened consumers' purchasing power, while a 9 per cent appreciation of the baht has slashed profits for exporters.

Lending interest rates, however, have increased by only 1 to 4 per cent.

"We have no hope of seeing two-digit growth this year because of economic and political factors. In the future, the car industry will grow in line with economic growth," Ninnart said.

Domestic car sales grew only 2.9 per cent, with 385,000 vehicles sold in the first seven months of the year, while other industrial sectors saw decreases of between 15-20 per cent in sales during the same period.

The 2-per-cent growth rate is extremely low compared to previous years.

Last year, domestic car sales grew 12 per cent year on year, while 2004 witnessed a surge of 17 per cent. In 2003, 2002 and 2001, sales rose 24, 30 and 37 per cent, respectively.

To make matters worse, along with the drop in sales, carmakers have experienced a 7-per-cent hike in the overall cost of raw materials. The price of aluminium jumped 22 per cent, while copper increased 20 per cent. Prices of plastic and tyres rose 8 per cent and 7 per cent, respectively, and the price of steel was also up 1 per cent, Ninnart said.

Despite the low growth, Ninnart said the car industry had been the least affected by the oil price hikes compared with other sectors.

"The industry has a special characteristic. We can launch new models or offer attractive financial packages to boost a sluggish market," he said, adding that Toyota has had 3,000 bookings for its new Bt1.5 million Camry within 12 days of its launch.

Moreover, the export market has grown by 33 per cent in the first seven months, equivalent to 340,000 units exported to 150 countries. Ninnart said he anticipates exports of 550,000 vehicles in total for the whole year.

Earlier, the FTI was confident that with this surge in exports, the car industry would hit its target of producing 1.24 million vehicles throughout the year. In the first seven months, 700,000 units were manufactured.

In the export market 77 per cent of vehicles are commercial cars, exported to countries including Australia, New Zealand and the Middle East. The rest are passenger cars exported mostly to Asian countries.

Car exports rank second of the Kingdom's overall exports, following computers, exports of which totalled US$5billion (Bt187.8 billion) last year. The net export value of car exports was $4.5 billion last year, based on an export value of $7.7 billion and imports totalling $3.2billion.

Ninnart believes car exports will take the place of computers as the country's No1 export within the next two years.

Meanwhile, the car industry has been developing an Intelligence Transportation System in a bid to increase the safety and efficiency of cars on the road after realising traffic jams could discourage future sales.

Ninnart said the average speed of a car in Bangkok is 7kph, which is slower than other cities such as Tokyo where traffic moves at an average speed of 14kph.

Moreover, the Kingdom's retail petrol prices are only Bt29 a litre, cheaper than the Bt72 in Hong Kong and the Netherlands, Bt31 in the United States and Bt37 in Cambodia. Thailand consumes 72 million litres of petrol and 52 million litres of diesel per day.

The pall over the car industry has also affected the hire purchase sector, said Chaiwat Utaiwant, AIG Consumer Finance Group's country manager. He said the industry has tried to become a low-cost service provider in order to sharpen its competitiveness.

Anoma Srisukkasem

The Nation