Moving forward after last year’s bumps

Optimism expressed by the automotive sector for 2021

The country’s automotive industry felt the grave impact of the coronavirus disease 2019 (COVID-19) pandemic last year. Yet, with the economy gradually opening up and the industry eventually surviving the bumps from earlier months, it takes a positive outlook this year while it is set to embrace significant disruptions among consumers.

As the lockdown caused showrooms to close, the joint total vehicle sales of Chamber of Automotive Manufacturers of the Philippines (CAMPI) and Truck Manufacturers Association (TMA) reflected the pandemic’s impact.

The drop started in March 2020, when 11,029 units were recorded, much below 29,790 units in February. Then, in April — a month after the lockdown started — car sales plunged to only 133 units, apparently the lowest monthly sales output to date.

The following months, however, saw a slow yet assuring rebound for the industry. Car sales rebounded in May with 4,788 units, and slight increases by up to 31.9% were seen until July, which tallied 20,542 units.

The month of August, when Metro Manila and nearby provinces was under modified enhanced community quarantine for two weeks, showed a bump in sales with 17,906 units. Sales were seen to pick up afterwards. Albeit the succeeding figures were below the peak reached in February, total units reached by as much as over 25,000.

The latest CAMPI-TMA figures show that on the first 10 months of 2020, 173,025 units were tallied, down by 42.7%. Commercial vehicles (CVs) still have a bigger share of 119,968 units, while passenger vehicles (PVs) tallied 53,067 units. Meanwhile, Toyota Motors Philippines stays in the lead with 43.25% market share, followed by Mitsubishi Motors Philippines Corp. with 17.07%, and Nissan Philippines, Inc. with 12.15%.

Change among consumers

Changes have not only taken place among manufacturers. Moreover, shifts among consumers were seen.

Daniel Scott, co-founder and chief executive officer of online automotive marketplace AutoDeal, observed that car buyers are leaning more towards affordability.

“The pandemic is just one of many changes that have altered buying preferences over the course of the last few years. What was immediately noticeable from consumers was an increased economic focus; with interest levels for affordable city cars and subcompacts sharply increasing; and larger vehicles like midsize SUV’s decreasing,” Mr. Scott told BusinessWorld in an e-mail.

Their platform noticed that approximately 60% of consumers tend to shop in a price range of P1,250,000 or below, representing around a 5% shift from 2019 when consumers were eyeing pricier purchases. 

Mr. Scott also stressed that many consumers are “gravitating towards small crossover vehicles that offer some of the rugged nature as SUVs but at a lower price”.

“This has given way to steep interest to relatively new players in the market like MG, Geely and Chery which present significant competition in a corner of the market that’s not only rising in interest, but relatively less populated by products from brands who’ve been established for some time,” he added.

A year of recovery

As it moves forward in the new normal, the industry is optimistic enough about its recovery in the long term.

In a report on BusinessWorld‘s motoring section Velocity last December, Atty. Rommel Gutierrez, president of CAMPI, said that this year will be “a year of recovery for the auto industry”, projecting the industry to grow by 20% to 30%. In addition, he finds the availability of the COVID-19 vaccine as a ‘game changer’. “It will definitely help restore confidence in the buying public,” he said.

Tey Sornet, president of Southgatemotors Ventures Corp. and managing director of Auto Transport Ventures, projects a growth of 33%, bringing sales to a 320,000 units level. “It would be a recovery year for the industry… but would still be 22% below the peak level of 2019. This is mainly due to the continued weakness of the economy continuing to affect the demand and the appetite of the banks in approving auto loans,” he was quoted as saying in the same report.

Mr. Sornet also expects a continued increase in the CV segment by 34.60% as “trucks, buses, van, and pickups will continue to be in strong demand”.

While he expects Japanese brands such as Toyota, Mitsubishi, and Nissan to remain at the top, Mr. Sornet also looks forward to Chinese brands such as MG, Foton, Chery, Geely becoming strong players this year.

From an intelligence’s point of view, Fitch Solutions also expects growth for the automotive industry. On December, it revealed that total vehicle sales in the country will expand by 21.5%.

“[O]ur optimistic outlook for sales in 2021 will be driven by low base effects as we expect a 43.1% contraction in sales for 2020 as Typhoon Vamco (local name: Ulysses) dampens November 2020 sales on a [month-on-month] basis.”

Such increase will be driven by purchases of CVs, which the report predicts will climb by 23%. PV sales, meanwhile, are expected to be up by 18%.

“[W]e remain optimistic on Philippines vehicle sales in terms of growth, however we expect sales volumes to remain below pre-pandemic levels until 2024,” the report added.

Online-driven consumers

On the other hand, changes among consumers that are shaped by the pandemic are expected to stick. Mr. Scott of AutoDeal forecasts that online shopping and purchasing will increase in popularity as consumers aim to minimize physical contact and utilize online platforms. 

“Not only will dealers need to transition their workforce to become increasingly competent in accommodating online customers, but due to many financial restraints, dealers may need to re-evaluate strategies so that they can look to maintain their volume through more economic and efficient means,” he added.

This online-driven trend is seen to have repercussions on providing auto loans and auto insurance. “We expect that banks and insurance providers will continue to take steps to increase their accessibility to consumers by being where their customers are when they’re shopping,” the CEO explained.

Also, Mr. Scott expects a strong interest sustained in the entry-level market, while he sees the used-car market becoming “an increasingly viable option for consumers”.

“Brands and dealer groups may continue to further explore certified repossessed programs as a means to diversify revenue. If this happens, then it could also generate stiff competition for your traditional used car dealers,” he advised.