Honda Motorbikes has 80% of the Thai motorbike market. It is a good bellwether for the Thai economy with the market made up largely of Thai farmers with lower incomes and younger, working class Thai citizens. Sales began to fall in 2018 and conditions are reported to be challenging for the first 2 months of 2019. The high value of the Thai baht is thought to be at the root of the problem as farmers see lower prices on reduced export volume. The reports could spell trouble for the Thai government ahead of the March 24th poll as the farming vote is highly influential.

The sales of Honda motorbikes make a road map of their own when telling the story of Thailand’s economic performance in the first two months of 2019. They may also point us in the direction of the election outcome. The story is one of depressed incomes for Thailand’s struggling farmers due to a stubbornly high baht which is damaging Thailand’s competitiveness on the export market.

The leading Japanese motorbike company Honda has revealed that it expects a decline in the sale of its products in Thailand during the course of 2019. The fall off in sales is being primarily attributed to weaker prices for agricultural crops grown by Thai farmers.

Honda Thailand, the dominant player in the Thai motorbike market has reported a difficult start to 2019 and is projected lower sales for the year. It suggests that depressed farming incomes caused by lower crop prices and a decline in agricultural exports may be leading a tougher economy in Thailand. The stubbornly high Thai baht is being exacerbated by inward capital investment into Thailand’s property market. This could also signal trouble for the incumbent government in the March 24th general election. It had specifically targeted the farming sector with a pledge to protect farm incomes.

The company expects sales in Thailand this year to be lower by as much as 4% with projected sales of over 1.5 million units. The sales figure for the year was set at the beginning of 2019.

High Thai baht against the US dollar is devastating income prospects for Thailand’s farmers

A key factor in the lower sales projection is the increasing high value of the Thai baht against the US dollar. This is despite calls from government agencies to Thai exporting firms to try to move away from dollar billing. However, the US dollar still remains the key international currency in the world’s market with a particularly high bearing on agricultural prices. Honda, in turn, relies on Thailand’s farming sector for the bulk of its sales with as many as much 45% of Thai people still thought to be living on the land. The motorbike is the chosen mode of transport for many Thai farmers who live on lower than average incomes.

Reduced sales of motorbikes shows failure of government to boost farming incomes in Thailand

This could spell bad news for the Thai government as election day approaches. One of the key targets for Palang Pracharat, the political party that supports the incumbent Thai Prime Minister Prayuth Chan ocha, has been the farmers on the land. A key and much vaunted objective of the current government’s policies and initiatives has consistently been to raise their incomes.

The local Honda subsidiary in Thailand holds a dominant 80% market share. In fact, the popular motorbike brand has an even greater share in both the Indonesian and Vietnamese market among the the same kind of consumers.

Exports decline suggests that the US China war is also severely impacting Thailand

It reported that the first fall off in sales in three years began during the course of  2018. This seems to indicate that the decline in Thailand’s export output, which set in during the latter half of last year, may have been a signal for  a bigger down turn. A key factor impacting market conditions is consistently reported to be the US China trade war. Yoichi Mizutani is the President of the Honda subsidiary in Thailand. He believes also that the lower prices being achieved in the agricultural market is a key cause for the downturn in motorbike sales but also points to the disruption to Thailand’s booming tourism business that occurred for a number of months at the end of 2018.

Honda family motorbikes up marginally but sports motorbikes down by nearly 23% in first months of 2019 with overall sales down 4%

Honda in Thailand is looking for signs of an improvement in 2019. The first two months of the year saw sales of 154,000 motorbikes in the what the company terms its family market. This was an improvement on 2019 with a 0.7% lift on last year’s figures. Any optimism at this figure however was wiped out by nearly 23% shaved off its sales of sport motorbikes measured against the figures for last year when only 31,000 motor books were sold. This means the company saw a drop in sales between these combined two markets for the first two months of 2019 to the order of 4%.

2019 is a transition year in Thailand

Most analysts see 2019 as transition year for Thailand. The uncertainty about what the aftermath of Thai general election will hold for Thailand’s political future is beginning also to take hold. The chaotic political environment led to Thailand losing significant economic growth and opportunity 5 to 6 years ago at a time when the country descended into factional street protests. People are well aware of the adverse consequences which may ensue if there is failure to have a smooth political transfer of power or if the new government that is installed lacks authority or is beset by protests.

High Thai baht being exacerbated by higher foreign investment in Thailand’s property market

In the meantime, the stubbornly high Thai baht and its negative impact on agricultural prices is being exacerbated by inward investment by foreigners into the property market and a corresponding lack of investor confidence in western economic prospects. Thailand’s agricultural sector is, in the meantime, experiencing headwinds with difficult markets for nearly all crops due to intentional competition and the effects of the high Thai baht on the country’s competitiveness. This year, the Thai Rice Exporters Association projected export volumes of 9.5 tonnes for 2019. This represents a 14% decline on 2018 figures. The price of palm oil is also moving lower according to a report from Thailand’s Office of Agricultural Economics.