‘Mobility in the New Normal’ webinar gives clarity to the auto industry game plan
I BEG your indulgence as I start off this week’s column expressing a deep sense of gratitude to everyone who made last Wednesday’s inaugural staging of the “Mobility in the New Normal” webinar series of our sister publication The Philippine STAR’s “Wheels” section a success. As I turn over this piece on a Friday, our webinar had tallied more than 232,000 views on the STAR’s FB page alone — breaking records and certainly surpassing our expectations. Kudos to the team behind this endeavor for the hard work, the faith, and the encouragement.
I tip my hat to the powerhouse lineup of panelists who were engaging and animated throughout our discussion (in alphabetical order): Vincent “Vince” Licup, dealer principal handling the Chery, Chevrolet, Foton, MG, and Nissan brands; Atsuhiro Okamoto, president of the country’s leading auto company, Toyota Motor Philippines Corp. or TMP; Cholo Syquia, chief executive officer of Carbay Philippines, Inc., which operates the Carmudi Philippines and Zigwheels Philippines auto portals; and Willy Tee Ten, president of the Autohub Group of Companies which features at 34 (count ’em) automotive and ancillary brands. He also helms the Philippine Automotive Dealers Association which represents around 200 dealerships around the country.
Profound gratitude is also due TMP for sponsoring that episode, and to my BusinessWorld “Velocity” family for being a media partner and a wellspring of good vibes.
During the early days of the novel coronavirus, when it wasn’t even called COVID-19 yet, hardly anyone could have predicted it would reach the pandemic levels of today. But here we are, and the disruption has been felt across a whole spectrum of industries. One of the industries hardest hit, of course, is the automotive sector. Along with shuttered manufacturing plants and dealerships, vehicles also stopped running altogether as people stayed at home to help curb the spread of the virus.
READ ’EM AND WEEP
The result? Well, I want you to look at the slide culled from the recent joint reports compiled by the Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Truck Manufacturers Association (TMA). Total vehicle sales in March for CAMPI and TMA member companies reached 11,029 units, down 63% compared to 29,790 units sold in March 2019. CAMPI President Atty. Rommel Gutierrez attributed this to the shutdown of dealerships in the second half of March as Luzon went into ECQ lockdown.
In April, the figure dropped to an all-time low of 133 units. Last May, the figure leveled to a more respectable 4,788 units — heartening, but still a far cry from the 30,998 units sold in the same month last year. That’s a huge 84.6% decline. As of May, the year-to-date total of 69,463 units this year is still 51.1% lower compared to the same period in 2019.
While these figures taken as a whole paint a grim (albeit expected) snapshot of the year thus far, there’s reason to hope. That’s because while we’ve learned that NCR will still be on general community quarantine until the end of the month, car dealerships have resumed operations for a while now. Car companies and dealerships do not exist in a vacuum; they’ve been adjusting to the challenges and limitations in support of government regulations amid the virus.
Okamoto-san admitted that TMP projects saw a drop of 30% to 40% in sales this year compared to 2019, and that didn’t seem to be particularly surprising anymore to anyone in the panel.
“We had to follow government regulations to stay at home,” joined Willy, and said that one could look at the bleak numbers from either an optimistic or pessimistic standpoint.
It was pretty obvious though that he and the rest of our speakers were looking forward to a recovery, but expressed hesitation on just when an acceptable level of vibrancy would happen. I now wonder if we had held the webinar when the dealerships remained firmly on lockdown. Would the sentiment and general mood have still been light?
Willy expressed excitement to see the business perk up once ECQ shifted to GCQ. “It’s not yet back to pre-pandemic times, but at least our after-sales department (is operational). Sales is the biggest concern right now (and) banks are key to the automotive industry,” he maintained.
“We hope that the banks will be more relaxed and less stringent when it comes to approvals, so we can increase our figures in the next few months — until things get back to normal.” That was something that Vince had told me, too, during earlier conversations: That one of the keys to the recovery of the industry is banks and their faith in people applying for car loans.
Amid the pandemic and the activity-limiting protocols we all need to practice, auto companies (as with other enterprises) are evolving to leverage whatever business tools they can, such as social media. “Everyone is going online; that’s the only way to go right now,” Vince averred. “That’s the only realistic channel to do sales in now. As Willy said, our sales executives are all working from home.”
He was quick to add that there’s actually an advantage to WFH reality. “Before, there was traffic, and everything had to be face to face. Now, one agent can easily serve 10 to 20 customers a day. There’s no need to do office visits; you just use your fingers.”
Even if Carmudi Philippines and Zigwheels Philippines exist in the digital realm, Cholo confessed that the auto portals were also hit hard by the pandemic’s fallout. “We had leads, but we couldn’t deliver them to the dealerships because these were closed. We had to put our subscription packages on hold,” he rued, and admitted that the business was hit “at a critical” time when Carbay had achieved leadership among the country’s car portals.
The auto-buying appetite of people had understandably waned as well during the lockdown, and Cholo said he noticed people spent more time reading the portals’ newsfeeds than making actual inquiries on vehicles. Still, he revealed with a smile that they have been getting more sales queries now that quarantine restrictions have generally eased.
As dealerships have opened their doors to customers in this new, more cautious normal, there have been small victories as well. “There’s no more waiting now,” Vince observed. “Everything’s by appointment, so it’s more efficient.”
Willy said it’s taking some doing, but he and his people are coping with the demands and limitations. “Before, you would smile as you shook people’s hands. We can’t do that anymore,” he admitted, and rued that runs contrary to Filipinos’ natural hospitality. He has had to keep reminding their people of the protocols. “We have to be mindful of distance, for instance.”
There are also the now-familiar routines and implements: alcohol/sanitizers, temperature scanning, social distancing, disinfecting foot baths. “You have to sanitize vehicles, promote contactless payments,” Willy shared.
And saving people’s jobs and adhering to protocols during this difficult time also warrants cost-cutting measures, multiple shifts. “Some employees would work three days a week, but technicians of course need to work more days,” revealed the Autohub head.
Okamoto-san said that up to 70% of TMP’s people usually holding office at the GT Towers in Makati City are now working from home instead. Of course, those who man the company’s manufacturing plant in Sta. Rosa, Laguna need to be on site, even as they practice standard safety protocols.
“People have shifted a lot of their usual physical activities onto digital,” commented Cholo, who volunteered that a research firm whose services they contracted discovered that 58% of people increased their online payment transactions when quarantine restrictions happened. About half (51%) turned to online entertainment (Netflix, anyone?), and 48% browsed the Internet to check out meals and delivery services. The auto industry has been an even more dramatic study as 83% of people preferred to go online. Even if this research was conducted when NCR was still on ECQ, the digital shift surely still holds true.
The digital domain veritably allowed people to keep their dealership jobs. Salespeople went online to seek out prospective clients. “We did not have any layoffs; only the implementation of shifts,” reported Vince. “Allowances went to (social media post) boosting, rather than telecoms or gas.” The result was that more prospects were reached per day.
“Digital platforms are the way to go,” underscored Willy, who counts the iconic Mini brand (which recently rolled out a digital showroom) in Autohub’s considerable portfolio. “That and online payment will be the new norm.”
He also said, grinning, “Customers didn’t like to do online payment before. Now, they want to do online or bank-to-bank transactions.” Nonetheless, Willy commented that as digital tools and platforms become more pervasive, Internet connectivity and speed need to be improved, particularly in satellite cities and provinces.
For TMP’s part, MyToyota PH had been introduced early on to get customers into the habit of setting appointments for their dealership visits. “It promotes efficiency and a shorter waiting time,” submits Okamoto-san. Meanwhile, the Toyota Virtual Showroom affords the experience of visiting a dealership “through an easily accessible digital platform… (which enables) anyone to check out their dream Toyota anytime and anywhere. The digital experience enables users to select their preferred vehicle and get a 360-degree view of the available model’s exterior and interior.”
Even more, once a customer has selected a vehicle, “payment estimates can be calculated in the site and personal details may be submitted to connect the customer to their dealership of choice. Dealer representatives will then contact the customer to address further inquiries, offer official quotation and facilitate car purchase,” according to a TMP release.
As hinted at by TMP FVP for its Brand and Product Planning Cluster Cristina Arevalo during the company’s recent press conference prior to the launch of the new Wigo, the company is set to roll out a vehicle subscription/leasing service called Kinto.
According to the Toyota’s global website, Toyota Motor Corp. actually established Kinto Co., Ltd. “to manage and operate its beloved-car subscription service that proposes a new user-car relationship. The new company is jointly funded by Toyota Financial Services, Co., Ltd. (a wholly owned subsidiary of Toyota) and Sumitomo Mitsui Auto Service Company, Limited (a member of the Sumitomo Corp. Group).”
We got a scoop as well as we heard more information about the service from the TMP president himself. Okamoto-san said, “The purpose or vision of this Kinto implementation — which has started in Japan, Europe and other regions — (is tied to the fact that) the automotive market is a mainly an ownership market, especially in Philippines. Younger people still want to own vehicle. But in other regions like the Europe or US or China, after Grab or Uber implementation, the customer automotive life is gradually changing from ownership to usership.”
In concert with a new push to reintroduce its TCUV (Toyota Certified Used Vehicle) program, Kinto seems to be laying the foundation for much easier car access, especially in view of the extreme limitations (and risks) of taking public transportation in a COVID-19 reality.
“Toyota is preparing for such a change,” Okamoto-san posited. It’s about making the concept of automotive usership appealing. “Payment is very easy. There’s no down payment, there’s a fixed monthly subscription fee (for about three to four years).”
The TCUV program actually ties into Kinto because after the subscription, the vehicle can go into the used-vehicle pool. The executive described it an “ecosystem” for Toyota and its group of companies — a cycle of retail, trading, leasing, and resale.
This is a buyer’s market we’re in at the moment, joined Willy Tee Ten. All brands are intent to get their inventories moving again, and are offering all sorts of enticements for easier acquisition. If you ask Vince, he has been of the opinion that the demand has never gone away; it merely went into hibernation.
By early indications, there is still a measure of pent-up demand as displayed by that 3,500% spike from the woeful 133 units sold amid lockdown (come to think of it, that’s still 133 units despite all our grief).
What’s beyond the purview of auto brands is, again, the willingness of banks to approve car loans, as these were obviously similarly hit hard by the black swan event that is COVID-19. We can’t blame financial institutions if they take a cautious road and become more prudent with loans. In fact, Vince intimated that banks may ultimately help dictate the segments that will move. For instance, I might apply for a loan toward a mid-size SUV, then be extended a smaller loan amount good for a sedan instead.
In the final analysis, this not-so-new normal is being defined at its core by two crucial factors: The challenges and limitations posed by public transport, and the cautious approach of banks on lending. Add to this a perceived unwillingness (and maybe incapability) of a growing segment of the population (7.3 million are unemployed, and an untold number had their paychecks slashed) to afford a new (or even used) set of wheels at this point, and you have a tug-of-war to see whether our once robust auto industry will stay in the doldrums or be on the road to the recovery.