VEHICLE SALES in the Philippines are expected to be flat in 2020 as the enhanced community quarantine in Luzon shutters dealerships, Fitch Solutions Country Risk and Industry Research said in a downgrade of its previous estimate of 7.4% growth.

The automotive sector outlook published by Fitch Solutions Monday projected overall new-vehicle sales growth in the Philippines of 0.4% to 371,456 units in 2020.

“The closures of non-essential business activity will negatively impact vehicle sales in H120, as physical automotive dealership activity grinds to a halt which will prevent consumers from making new purchases,” it said.

In 2019 vehicle sales rose 3.5% year-on-year to 369,941 units, according to data from Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA). This represented a recovery from the 2018 industry slump, when sales fell 16% to 357,410 units.

President Rodrigo R. Duterte last week announced a month-long Luzon lockdown in a bid to contain the spread of COVID-19, closing most private businesses and banning public transport. Toyota Motor Philippines Corp., which manufactures cars in Laguna, suspended production until mid-April.

Fitch Solutions said that the inability to make vehicle purchases during the lockdown will cause a significant drop in sales, and economic and employment uncertainties will mean spending will likely go to essential goods.

“We believe that the fear created by COVID-19 will prompt consumers to hold off spending on non-essential goods, such as cars.”

Fitch Solutions expects lower sales for both passenger and commercial vehicles in 2020, but over the longer term it sees the market growing until the end of the decade.

The report said passenger vehicle sales will fall 1% in 2020, but will grow by an annual average of 6.8% from 2020–2029 as incomes rise and car-ownership rates rise from a low base.

“We hold a more bullish outlook for sales from 2021 onwards, as pent-up demand, due to delayed vehicle purchases, and the reopening of vehicle retail operations lead to a resumption of the expected expansion period in (passenger vehicle) sales,” it said.

“We believe that this increased demand for (passenger vehicles) will be led by higher incomes in the coming years as the country’s long-term economic outlook remains favorable.”

Commercial vehicle sales are expected to increase by 1% in 2020, but in this segment higher growth is projected up to 2029.

The modernization program for public utility vehicles that incentivizes the replacement of older jeepneys with environmentally-friendly light commercial vehicles, it said, is expected to face headwinds.

“In light of the total ban on all forms of public transport… transport operators will face significant losses in revenue due to a collapse in commuter demand, thus prompting them to hold off on their planned fleet renewals.”

But Fitch Solutions said it expects that the modernization program and the government infrastructure program may later on increase commercial vehicle demand.

According to CAMPI-TMA data, year-on-year sales for passenger vehicles were flat at 109,197 units sold in 2019. Commercial vehicle sales in 2019 grew 5% to 260,744 vehicles.

Socioeconomic Planning secretary Ernesto M. Pernia said GDP growth may slow to 4.3% in 2020 if COVID-19 continues to spread and the lockdown extends to the second semester. GDP growth in 2019 was 5.9%, its lowest level in eight years. — Jenina P. Ibañez

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