Kiatnakin Phatra Financial Group (KKP), the holding company of Kiatnakin Bank, anticipates auto loans contracting for a second consecutive year in 2025, pressured by a sluggish automotive industry.

The bank expects Thailand’s overall auto loans to shrink by double digits this year, following an 11% contraction in 2024. The contraction aligns with the broader downturn in the country’s automotive sector, affecting both new and used car markets, said Aphinant Klewpatinond, chief executive of KKP.

According to Mr Aphinant, the bank projects new car sales in Thailand to fall below 600,000 units in 2025. Meanwhile, strong competition from electric vehicles (EVs) and ongoing price reductions in the used-car segment will continue to weigh on the market.

Given these challenges, KKP will focus on asset quality control while cautiously growing its loan portfolio through selective approvals.

According to the Federation of Thai Industries (FTI), Thailand’s car production in 2025 is expected to reach 1.5 million units, with 1 million designated for export and the remainder for the domestic market. In 2024, car production declined by 20% year-on-year from a year earlier to a four-year low due to weaker domestic sales and exports.

Auto loans remain the largest segment of KKP’s loan portfolio, accounting for 46.8% of total loans, with used-car financing making up the majority.

Mr Aphinant said the bank began cautiously expanding its auto loan segment in the second half of 2023 while maintaining strict asset quality controls. Consequently, KKP expects to reduce its expected credit loss (ECL) provisions this year compared to 2024.

Additionally, the bank has set a flat growth target for total loans in 2025, an improvement from the 7.8% contraction recorded in 2024. While auto loans are expected to decline, growth in corporate and mortgage loans will help offset the contraction. The hotel industry, benefiting from the country’s tourism recovery, is expected to drive corporate loan expansion.

Separately, Pipat Luengnaruemitchai, KKP’s chief economist, forecasts that Thailand will receive 38.1 million foreign tourists in 2025, a 7.32% increase from 35.5 million in the previous year. Tourism remains a key driver of economic growth, with the bank projecting GDP growth of 2.7% this year, up slightly from 2.6% in 2024.

Mr Pipat noted that fiscal policy is expected to be more restrictive in managing government spending, particularly for stimulus programmes to support economic growth. As a result, the country’s public debt-to-GDP ratio could potentially reach the government’s ceiling of 70% within the next two years.

“We anticipate Thai GDP growth will remain below its potential rate of 3% for some time, as short-term stimulus measures continue to weaken long-term potential growth. Structural economic reforms will be necessary to support sustainable long-term expansion,” he said.