Under the hammer. Business is brisk at Union Auction.

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Under the hammer

Business is brisk at Union Auction but tighter car loan restrictions are cutting off the supply of seized vehicles.
Published: 16/04/2011 at 12:00 AM
Bangkok Post: Newspaper section: Business
 
Each week, a boisterous and lively atmosphere predominates at Union Auction, with 400 to 500 potential buyers gathering to bid on used vehicles.

One by one, popular car brands such as Toyota and Honda plus Suzuki motorcycles are brought in while an auctioneer announces the starting bids.

Prices increase by 2,000 baht each time bidders raise their hands.

Thailand's first car auctioneer was established in 1991 and auctions off cars each Saturday and motorcycles on Thursdays.

Up to 80% of the units put up are sold, and more than 50,000 cars were auctioned off last year.

As a middleman, the company provides a platform for buyers to meet those wanting to dispose of their used vehicles. Owners are held responsible for setting minimum prices, and the highest bidder wins.

However, Saowalak Chaidejsuriya, managing director of Union Auction, said stricter leasing regulations by financial institutions are making it more difficult for companies dealing in second-hand car auctions or used cars.

"The market for second-hand vehicles, with an annual value of 100 billion baht, will likely drop this year in terms of number of vehicles because of a decline in the confiscation rate by financial institutions," she said.

"This is in turn due to stricter loan approvals, meaning fewer vehicles will be up for auction."

Greater flexibility in monthly car loan payments averaging 5,000 to 7,000 baht have also resulted in greater payment ability, said Ms Saowalak.

Second-hand car auctions now represent only 2% of the country's vehicle trading market.

Ms Saowalak said the number of seized cars will be cut in half this year, resulting in around 100,000 fewer available units overall. "Actually, a drop of 50,000 units is already a lot," she said.

About 95% of Union Auction's business is cars and motorcycles, while auctioning off other products such as office equipment makes up the rest.

Auctions are now also held upcountry, about eight times a month as in Bangkok.

Most of the vehicles (60%) have been seized by financial institutions from customers who have failed to fulfil their financial obligations. The rest are from individual sellers.

For buyers, 70% are used car dealers and 30% members of the general public.

"We can sell almost all our stock upcountry, as we ask car owners to lower their prices, given the relatively high cost of an auction," said Ms Saowalak.

The company's revenue comes mainly from buyers, who pay a fee of 6,500 baht for each vehicle obtained. Sellers pay only a token fee.

"Our sales technique is to attract a large number of people and spark fierce competition. If the starting price is attractive, then that heats up the competition too," said Ms Saowalak.

Apart from used vehicles, the company also holds auto salvage auctions. One was recently conducted with Bangkok Insurance Plc, with more than 100 cars that were damaged in accidents auctioned off.

"Our car-salvage auctions always attract a large amount of interest nowadays. Some brands of auto parts have become hard to find, meaning they must usually be ordered from abroad, which is expensive," said Ms Saowalak. "So we always attract a large crowd at each one of these auctions."

The brands in high demand at these events include the Mercedes-Benz SLK55, BMW 520, Volvo XC90, Isuzu MU7, Mazda 2, Mazda 3, Toyota Camry and Toyota Wish.

Despite the ups and downs of this business, she remains confident there will always be a market for second-hand vehicles "because it is impossible for everyone to buy red-plate cars".

"People won't keep two cars unless it's necessary, so as long as there is a market for new vehicles, the buyers of the new ones will need to sell their old ones," she added.