In addition to being a bad year for the global economy on a whole, 2015 was extremely tough on the car market of Brunei. The weakest performer in the region, sales of cars in Brunei shrunk by 20.40% – more than any other country in Southeast Asia.

With the last recorded data suggesting that there needed to be an additional sale of over 5,000 vehicles to exceed last year’s digits, the figures this year are quite behind even that. The number 5,000 may mean very little in some cases but with the average monthly sales just averaging just around 1,300 units, this difference in sales is in fact quite big.

There are many reasons why the market has been down recently but the main factor would be the newly implemented loan cap or more commonly known as the Total Debt Service Ratio (TDSR) set by Brunei’s central bank Autoriti Monetari Brunei Darussalam (AMBD).

 

More Loan Restrictions for Cars in Brunei

Many industry experts are in consensus that the new loan cap is the main obstacle standing in the way of car purchases. Currently set at 60% for those earning a minimum net salary of $1,750, the total debt service ratio is a measure used by lenders to decide whether the borrowers are already in too much debt by showing the proportion of gross income that is already spent on housing-related and other similar payments.

It was not implemented without reason. The new loan cap was put into place because of a disturbing discovery from a survey of the general population in Brunei. The survey revealed that over 1,000 household had unbelievably high house hold debt level and no active savings whatsoever.

Therefore, with the aim of reducing household debt levels, AMBD introduced this new regulation in May 2015 stating that they believed this would help people keep more of their income for daily expenses and manage their personal finances better.

When asked to comment on the current situation of the car market, AMBD said that the present predicament was not the result of the action that they took but the collective efforts of a lot of other factors including but not limited to the global economic crisis, the cyclical nature of the car market, and the fact that people today tend to buy less cars and use chauffeur services only when needed.

According to the statistics from the ASEAN Automotive Federation (AAF), sales in 2015 fared worse for every single month which led to the whopping 20.40% decrease in sales by year end.

A car salesman mentioned that he experienced dealing with a many customers who had wanted to buy a car but were unable to do so due to their financial situation in which banks did not approve their loan.

The same person pointed out that the downward trend in sales is expected to continue even though the festive season will be coming, which would normally see a spike in sales.

 

The Car Industry in ASEAN is Still Doing Fine

Just because the automotive sector in Brunei is faltering does not mean the end for the ASEAN region as a whole. With available data for seven countries, AAF revealed that some of the countries are experiencing phenomenal growth with Singapore and Vietnam leading the way.

Making sales of close to 70,000 units, Singapore shows the highest growth rate in the region at a 63.20% increase year on year, and Vietnam at a 58.30% increase year on year. However, summing up all each parts, the region as a whole saw a clear fall in sales in the car market by about 5%.

Car sales in China are also doing fine – and many local companies even expanding abroad.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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