Digital redefines consumers’ transactions, but physical channels are expected to blend in

As an avid shopper, Queenie Boado, a third-year law student, used to shop in malls on a weekly basis before the pandemic. For her, shopping helps relieve the stress from both work and school.

Then came the quarantine, and she swiftly turned to online shopping. “Not only it is convenient; it’s much safer than the usual mall shopping. It saves time and has better prices too,” Ms. Boado told BusinessWorld via online correspondence.

Since the coronavirus disease 2019 (COVID-19) came into the country last year, consumers suddenly have shifted from physical means to online ones. As many stayed at their homes during the quarantine, they have turned to online platforms to shop for items. Online channels of banks and electronic wallets, likewise, have been further tapped to pay and transfer money.

Now, as the ‘new normal’ proceeds under less strict quarantine, going digital in terms of shopping and banking is being integrated into Filipinos’ lifestyles in the long term.

In the earlier periods of the quarantine, malls limited their operations to essential stores such as supermarkets and groceries, leaving most brick-and-mortar (B&M) stores closed. This left retail losing a vital channel of reach and revenue.

“The prolonged lockdown has shown up in the reduced revenues of almost all retailers. Sales have dropped between 50-80% from pre-pandemic levels,” Roberto S. Claudio,  a vice-chairman of the Philippine Retailers Association (PRA), was quoted as saying in a year-ender report of BusinessWorld last December.

Mr. Claudio also stressed that while online sales increased from 100-500% from online capable retailers, it was not enough to cover for the lost sales in B&M stores.

Growth in e-commerce

Nonetheless, the e-commerce trend has visibly boomed as consumers shifted their shopping online.

As Oxford Business Group (OBG) cited in their “Philippines 2021” report, a survey by creative agency We Are Social and social media management platform Hootsuite in July 2020 revealed that 78% of Filipino consumers had made an e-commerce purchase. This is 4% higher than the firms’ figures in January 2020, a few months before the March lockdown. 

Also, Kantar Philippines’ most recent quarterly FMCG Monitor reports showed steady progress in using online channels in spending for fast-moving consumer goods.

While direct sales were found to be hard hit, the share of online channels thrived in June 2020, with 27% change in year-to-date (YTD) compared to 2019. Last September, this share grew to 48% significant growth in YTD compared to 2019.

Raymund Alimurung, chief executive officer of Lazada Philippines, observed that the pandemic has served as a tipping point for e-commerce.

“It’s a little bit morbid to say, but the pandemic has been the best advertising for e-commerce. It’s not something out of desire, but out of necessity,” Mr. Alimurung said during the BusinessWorld Virtual Economic Forum last November, adding that many who have been exposed to e-commerce during lockdown are now realizing its convenience.

For Ms. Boado, the pandemic has pushed her further from shopping in physical stores to shopping online. “Prior to the pandemic, I’ve already been an avid fan of shopping online since I can easily compare prices of products from different shops; read their reviews; [and] get cash backs, coins, and vouchers. Plus, the thought of waiting for the package to arrive right at my doorstep excites me,” she shared.

E-commerce’s potential, B&M’s return

Compared to its Asian neighbors, however, more room is still seen for e-commerce to grow in the Philippines and in Southeast Asia. A report by Kantar Worldpanel Division Asia shows that the adoption rate of e-commerce in the region is “still limited to 1 in 10 households”. Moreover, the penetration rate of e-commerce in the Philippines is 7.3% last September, way behind the numbers of its neighbors like China, Korea, and Taiwan. 

On the bright side, about 70% of Filipinos surveyed said they shop online because of epidemic concern, and 50% claimed they will shop more online.

In addition, OBG’s report mentioned a survey by Visa indicating that “73% of Filipino consumers are likely to sustain or increase their pandemic level of online shopping once restrictions are eased”.

Online shopping, while continuing to break ground in the country, is bound to be permanent among consumers. Yet, hope is still seen for B&M stores and, especially, malls, which fully reopened since June.

“I personally do not see online retailing completely taking over from in-store retailing. Retailing as an industry will become omnichannel,” Mr. Claudio of PRA was quoted as saying, adding that developing digital infrastructure will be an agenda for retailers who do not have it yet and opening showrooms with digital hubs is a possibility for e-commerce shops.

Mr. Alimurung also expects consumers to return to malls as markets open up. With e-commerce gaining traction during its ‘trial period’ during the lockdown, nonetheless, the trend will continue in the months ahead.

“[W]e expect to see [e-commerce penetration] growing. We see that in the types of brands boarding [and] the daily users that are going on [our platform]. These trends will just don’t go any other way,” he said.

Meanwhile, Lorenzo C. Formoso, also a vice-chairman of PRA, believes that the future of retail will rely on the developing response to the pandemic. “[T]his ‘new normal’ is not really normal until the advent of the vaccines and quick tests,” Mr. Formoso said in the latest World Retail Congress report. “We must remain optimistic as new developments are already taking place.” 

Acceleration in digital transactions

At the same time, shopping has gone further online for many consumers, digital channels have been further used by more individuals than before for transactions.

Ms. Boado shared that her online transactions increased since the pandemic. “I’ve transacted more, twice or even thrice than my usual transactions before the pandemic since most banks waived their convenience fees. This is really my preferred payment method not only for my purchases but also for paying bills and doing money transfers,” she said.

It has been stressed multiple times in the previous year that the country’s transition to cashless banking and electronic payments, or e-payments, has accelerated due to the pandemic.

In a fireside chat in the BusinessWorld Virtual Economic Forum, Bank of the Philippine Islands (BPI) President and CEO Cezar P. Consing observed firsthand the surge in digital transactions.

“The thesis that COVID accelerated cashless society is true,” Mr. Consing said. “It was all very slow at first, very gradual, incremental growth. All of a sudden, we saw daily digital enrollments from our customer base to the tune of 20,000 to 30,000 a day. Because of all of these enrollments, more than half of our 8-9 million customers are now enrolled digitally.”

The BPI president also noted that the bank’s transactions by volume done through ATMs, online, or mobile grew from about 70% pre-COVID to over 90% upon the start of the lockdown. Physical branches still account for the bank’s bulk of transactions in terms of value, he continued, but the volume of branch and ATM transactions remained lower than pre-COVID levels.

Data from Bangko Sentral ng Pilipinas (BSP), meanwhile, showed big increases in the value and volume of e-payments facilitators PESONet and InstaPay.

According to the central bank’s governor, Benjamin E. Diokno, the value of PESONet jumped 100% year-on-year, while the value of InstaPay increased to almost 400% for the first eight months of 2020. In terms of volume of transactions, PESONet increased by 130%, while InstaPay jumped by 624%.

“This is truly excellent news. As governor of the BSP, one of my personal goals is to have not less than 50% of transactions, by volume and value, to be done digitally by 2023. With the pandemic, I am optimistic that this goal will be met even sooner,” Mr. Diokno said during the Digital Banking Asia webinar last November.

Advancing the ‘cash-lite’ vision

Pushing further Mr. Diokno’s vision of a cash-lite economy in the country, BSP unveiled last October its Digital Payments Transformation Roadmap 2020-2023, which intends to set out initiatives and strategies for advancing an “efficient, inclusive, safe and secure digital payments ecosystem.”

The roadmap targets to strengthen preference for digital payments by digitizing half of the total volume of retail payments and by expanding the number of the financially included to 70% of Filipino adults. It also aims for BSP to improve access to more innovative digital financial products and services.

These objectives are intended to be met by developing digital payment streams to accelerate wider acceptance, establishing the necessary digital finance infrastructure to facilitate interoperability in the digital payments ecosystem, and implementing digital governance standards to safeguard the integrity and privacy of consumer data.

Alongside this roadmap, Mr. Diokno continued in his speech, BSP sets to pursue more digital payment initiatives in the near term. One of these initiatives is extending the QR Ph use case from only person-to-person (P2P) payments to person-to-merchant (P2M) payments. 

“Since accepting payments via QR is simple and affordable, it is expected to benefit not only large business organizations but also the small unbanked vendors such as peddlers, sari-sari store owners, and other entrepreneurs,” Mr. Diokno said.

Other initiatives include simplifying bill payments through a “one bills payment facility”, streamlining payments between businesses and consumers through the “request to pay service”, and making recurring payments less hassled through a direct debit use case.

The central bank is also proactively building a conducive regulatory environment for digital innovations, primarily digital banks. Late November, BSP’s monetary board approved the recognition of digital bank as a new bank category that is separate and distinct from the existing bank classifications.

“Digital banks will play an important role in the digital financial ecosystem. We see these banks as additional partners in further promoting market efficiencies and expanding access of Filipinos to a broad range of financial services, bringing us closer to the realization of our target[s],” Mr. Diokno said in a separate statement.

Blended banking

For its conveniences and efficiencies, coupled with strong support from the BSP, digital banking and electronic payments are expected to be a permanent feature for consumers in the new normal.

For Ms. Boado, online transactions will be a permanent fixture in her routines. “In this time and age, almost everything is within reach and can be done with a single tap — even available 24/7,” she shared. “Convenience will always be my top priority, so doing transactions online will surely be my long-term option.”

For Mr. Consing, there is no going back to analog means of banking for many. Yet, he looks forward to a hybrid of analog and digital for banking moving forward.

“Come the vaccine, I think it will be a combination of high tech [and] low touch,” he said, stressing the term “phygital”, or physical and digital combined.

“The volume of digital transactions is high, but the bulk of the value is still being supplied by the branches. Over time, that value in digital transactions will also grow a lot, so [it] will create as much value, if not more, than the physical,” he added.

Telcos, transportation, logistics see positive, digital-driven outlook

Connectivity has become more crucial when the coronavirus disease 2019 (COVID-19) pandemic restricted mobility. It halted public transportation for some time and disrupted logistics amid its continued operations, while pressing telcos to improve their services to meet a spiking demand.

With the economy proceeding into the new normal amid the ongoing battle against the pandemic, the reshaped telecommunications, transportation, and logistics sectors are expected to meet increased and intensified demands among consumers.

Addressing Internet issues

As the pandemic forced many to shift to remote work, online learning, and cashless banking, among others, it has further stressed that Internet connectivity is no longer a luxury but a necessity. 

Ndiame Diop, World Bank’s (WB) country director for Brunei, Malaysia, Philippines and Thailand, regards Internet connectivity as the foundation of the digital economy. The problem, however, lies in the lack of digital infrastructure.

“Internet connectivity… is limited in rural areas, and where they are available, services are relatively expensive and of weak quality,” Mr. Diop was quoted as saying in a statement from the National Economic and Development Authority (NEDA), which partnered with WB in a recent report on digitalizing the Philippine economy.

“Upgrading digital infrastructure all over the country will introduce fundamental changes that can improve social service delivery, enhance resilience against shocks, and create more economic opportunities for all Filipinos,” Mr. Diop added.

Figures cited by NEDA and WB’s joint report show that the country’s mobile broadband speed is at 16.76 megabytes for second (mbps), much lower than the global average of 32.01 Mbps. 3G/4G mobile average download speed, meanwhile, stands at 7 Mbps, nearly half below the 13.26 Mbps in the entire Southeast Asian region.

Addressing these slow speeds is among the issues the telco industry has been tackling since the onset of the pandemic. With the Bayanihan to Recover As One Act simplifying the permit process for building cell towers, telcos are looking forward to better connectivity in remote areas.

“It is a real window of three years [of ushering] in a very real ‘Build, Build, Build’ for telcos and digital infrastructure,” Gil B. Genio, chief technology officer of Globe Telecom, Inc., stressed in a BusinessWorld Insights forum last September.

He added that if the country can build about 50 to 60 thousand cell towers in the next three years with the help of independent tower companies, coupled with intense competition among present players, “we will actually get to a decent kind of penetration for mobile Internet”.

In addition, Alfredo S. Panlilio, president and CEO of PLDT, Inc.’s wireless arm Smart Communications, Inc., noted that because of the pandemic, opportunities have opened up for the digital ecosystem to improve. As digital is further employed across industries, demand for Internet connectivity is expected to continue after the pandemic.

“Connectivity is best positioned as a frontline need for a very long time, and our goal for the near future is clear. We will continue to uphold customer centricity and adapt to various changes in the consumer mindset, having a good understanding of the way people live, work, play, and entertain themselves in this new normal,” Mr. Panlilio said during the BusinessWorld Virtual Economic Forum last November.

Transportation for individuals

As mobility has gradually revived after months of strict lockdown, transformation in transportation is observed, with an appreciation for ‘individual mobility’ and the push for transit-oriented developments (TODs) taking the lead.

Christophe Vicic, country head of JLL Philippines, proposed in the same online forum that TODs serve as one of the answers to the country’s transportation issues and, eventually, help direct the country towards improved connectivity.

“We’ll never be going back to [what was] before, but there will always be people transiting,” Mr. Vicic said, adding that TODs will attend people in transit by cutting commutes and reducing household spending.

As Mr. Vicic explained, TODs are characterized by walkable designs that prioritize pedestrians, train stations as a prominent feature, with public squares fronting these stations.

With these features, among others, TODs are set to be sustainable and eco-friendly, responding to ‘the clear message from the pandemic’: “We want a safer and healthier space to work and live, but we also want a healthier and safer way of working and living,” he said.

In addition, the pandemic has driven a rediscovered appreciation of individual mobility, according to Dr. Ting Wu, a partner of McKinsey & Company China. 

“There’s going to be a balance. [We] believe the long-term transport, especially in major urban areas, [will] have a hub and spoke model where you have public transportation as the backbone,” Dr. Wu added.

“We do expect the world, across different geographies, to have a significant change of landscape in terms of transportation modes. Some are gearing more towards public transportation, some towards electric transportation, [while] some are towards shared micro-mobility,” he continued.

E-commerce boosting logistics

With an uptick in e-commerce, which is nonetheless enabled through connectivity, logistics is seen to support this trend. Steady growth is hence expected for the sector.

“[T]he logistics industry is one of the luckiest sectors, because there is still growth in that segment, and that’s because of the growth in e-commerce,” Sheila Lobien, executive officer of Lobien Realty Group, said in a BusinessWorld B-Side podcast last September.

She added that the sector is projected to grow by as much as 9% in the next three years, having observed that warehousing facilities and logistic support is needed to complement the growth in e-commerce.

Martin Cu, country head of Ninja Van Philippines, shared in the BusinessWorld Virtual Economic Forum what logistics will turn out to be post-COVID.

He sees an increasing client base in logistics, with more micro, small, and medium enterprises who are selling socially coming in. The sector is also expected to innovate delivery processes (e.g., same-day deliveries) while elevating safety protocols.

Moreover, Mr. Cu expects logistics to provide online sellers with business solutions that will meet their changing needs.

“We recognized that within Southeast Asia and across the sister countries that we have in Ninja Van, we can actually help by connecting our various sellers across this ecosystem and allow them to resupply very seamlessly,” Mr. Cu explained. “We have seen that that has been very valuable for a lot of shippers in terms of maintaining their businesses and their supply chain.”

Prior to the pandemic, the Philippine property landscape was a bustling hub of investment. In fact, on the back of the government’s continued infrastructure investment, increased development of co-living projects, a surge of mid-income condominium units, and aggressive office construction alongside the explosive growth of the online gaming industry in 2019, the country’s real estate industry looked onwards with optimism.

Not half a year later in May, real estate experts Colliers International released an outlook calling the pandemic “worse than the Global Financial Crisis”, downgrading its previous net take-up forecast due to a softer demand in the market.

“We believe our original projection of 900,000 square meters (sq.m.) of net absorption (9.7 million square feet) is unlikely to be achieved. For 2020, Colliers is now looking at a net take up of between 300,000 sq.m. (3.2 million  sq.ft.) and  600,000 sq.m. (6.5 million  sq.ft.),” the report said.

“As a result, vacancy will likely hover between 5.5% and 7% in 2020. We see this supply and demand imbalance resulting in a 17% drop in office lease rates in Metro Manila this year.”

Yet the challenges for the industry did not end there. Inhibited by tax regulations and restrictive quarantine measures, Philippine online gambling operators (POGOs) were closing shop one after the other. In a report released by real estate consultancy firm Leechiu Property Consultants (LPC) in August, POGOs were found vacating 48,000 sq.m. of office space from March to June, making up 54% of the 89,000 sq.m. of vacated space during the period.

This exodus has led to a drop in first-half transactions to 234,000 sq.m. in 2020 from the previously recorded 885,000 sq.m in 2019. The business process outsourcing (BPO) industry — which accounted for the second biggest share of office demand — failed to fill in the gaps left by the POGOs, resulting in a massive plunge in office space demand of 74% in first half of 2020.

Property experts Jones Lang LaSalle (JLL) Philippines noted, however, that the BPO sector is expected to drive demand in the long term, despite the exodus of POGO firms in the country.

“Office demand from POGO firms may still remain despite ongoing tax concerns and reports of exits. We anticipate that operators that will stay are those that are keen to expand their operations in the country and lead to stable office demand moving forward,” Janlo de los Reyes, head of research and Consultancy at JLL Philippines, said.

The residential and retail sectors similarly showed weak activity due to the pandemic, with average residential rental vacancy rising to 8.2% in the third quarter of the year, while average retail vacancy rate increased by 6.3% as store closures outpaced store openings. JLL added that around 80% of mall developments originally slated for completion in 2020 slipped to 2021 due to construction schedule challenges posed by the pandemic.

Looking beyond the pandemic

Massive as they were, the consequences and overall impact of the pandemic are likely to linger throughout the year. Mr. de los Reyes said in a previous email that office space demand will remain subdued in 2021, led by the BPO and e-commerce sectors.

However, demand is still expected to improve as organizations adjust to the “new normal” of business activities. “We anticipate a change in office space requirements given the operational impact of the pandemic where flexible work arrangement has become a norm across occupiers,” he said.

“We’ve seen the growth of e-commerce which is driving the logistics sector, technology, and on demand services firms. We’re also seeing increasing activity in data centers, security companies, life sciences, and multi-family dwellings,” he said.

The significant growth of such sectors, driven by necessity and burgeoned by the ongoing health and safety measures, could provide the much-needed opportunity for recovery for developers. Colliers suggested developers to continue to adapt to the evolving preferences of investors and tenants to survive “in a property market that has been redefined by the pandemic”.

“In our opinion, developers should continue converting and repurposing assets to take advantage of opportunities brought about by a lockdown economy. We recommend that developers and tenants continue to monitor opportunities in the market especially with the government-projected economic rebound in 2021,” Colliers said. 

It added, “In our view, office landlords should be proactive in offering alternative leasing schemes to tenants while mall operators and retailers should ramp up omnichannel strategies to take advantage of pent up demand. Condominium developers should be on the lookout for attractive sites and price segments.”

Colliers projects new office supply to reach 632,600 sq.m. (6.8 million sq.ft.) (+64% YOY) and a net take-up of about 250,000 sq.m. (2.7 million sq.ft.) (+213% YOY) in 2021. Vacancy rates are still expected to rise to 11.6% with rents treading a slow path to recovery of 2%.

For the residential sector, the forecast is a project delivery of 7,270 new units in 2021, up 21% from 6,000 units in 2020. More than 75% of the upcoming supply will likely come from the Bay Area as selected projects in 2020 were delayed to 2021 due to temporary work stoppages. 

Colliers also sees the delivery of about 304,700 sq.m. of new retail space in 2021, with a projected vacancy rate of 13% due to an expected rebound in consumers’ confidence and purchasing power. Lease rates are further expected to drop by about 2% in 2021.

Much of this depends on the rollout of the COVID-19 vaccine in the first half of the year. Colliers Philippines noted that the implementation of crucial infrastructure projects within and outside Metro Manila will be major drivers of growth moving forward.

“Previously, we emphasized that the completion and upgrading of railways, toll roads, and airports across the Philippines should contribute to higher land and property values. In our view, these projects are also likely to play an important role in dictating the development strategies of property firms beyond the pandemic,” Colliers said in its 2021 Property Outlook.

The timely approval and implementation of the 2021 national budget will be crucial in supporting economic growth for the year. The government has set a budget of P109 billion (USD 2.3 billion) for the Department of Transportation and about P667 billion (USD13.9 billion) for the Department of Public Works and Highways to resume the implementation of its landmark infrastructure program, and the construction of new roads, airports, and bridges is likely to stoke the property development sector. 

“In our view, these allocations will likely support the construction of infrastructure across the country beyond the current administration’s term. These public projects should also stoke demand for integrated communities outside of Metro Manila beyond 2022,” the firm said.

Colliers further suggested that office landlords, condominium developers, and mall operators be mindful of the government-projected recovery in 2021, urging them to be more strategic with their land banking and development strategies so they can capture pent-up demand once the economy rebounds in 2021. Particularly, office landlords should be more proactive in offering alternative leasing strategies to their tenants and assist those planning to occupy vacated PEZA spaces.

Meanwhile, demand in the residential sector in 2021 will likely be driven by mid-income to

luxury projects. As of Q3 2020, Colliers Philippines data showed that projects in these segments due to be completed from 2021 to 2022 have sold an estimated 86% of their inventory. To tap pent-up demand, developers should continue to offer flexible payment terms and adopt property technology (proptech) platforms, such as virtual reality (VR) tours and automated communication platforms for tenants and property management providers.

As it transforms the office landscape with new work-from-home models and stimulates residential transactions with such innovations, technology is serving to prop up recovery in the retail space.

This year, according to Colliers’ report, the pace of construction of new malls will ultimately hinge on the improvement of Filipinos households’ consumer confidence and purchasing power; and retailers’ propensity to continue taking up physical mall space despite the growing popularity of online shopping.

“Some mall operators have introduced curbside pick-up where customers are offered a contactless option to get their orders. Others have rolled out personal shopper services to reduce the risk of transmitting the COVID-19 and to enable contactless shopping,” the report pointed out.

Major players are leading the charge. Ayala Land is offering DeliverEasy and Ayala Malls Neighborhood Assistant (ANA); Megaworld has launched a lifestyle delivery app Pick.A.Roo; SM Supermalls has introduced Get and Go which offers curbside and drive-through pick-ups for essential needs; while Robinsons Malls is offering Ring Rob, Rpersonal Shopper and Rdelivery services.

“A number of retailers have also been aggressive in rolling out online shopping strategies. Swedish furniture giant Ikea recently announced that they will likely open their online store months before the completion of their physical store in the Bay Area. H&M has partnered with Zalora to setup its first e-commerce marketplace while Merrymart is pioneering the dark grocery stores concept that intends to provide a 15-minute delivery service in selected cities in Metro Manila,” Colliers said.

Whether such measures would be enough to turn the tide of a struggling industry, likely only time will tell. The Philippine property market has undoubtedly been redefined in the span of a short year, and it will likely continue to change moving forward.

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.