A year of recovering lost momentum

Yearend review: Motoring perspectives

Vehicle sales are often taken as an effective indicator of a country’s economic health. This is because new car sales are a sign of consumer economic confidence, that more Filipinos are willing to commit to lease or loan payments for years into the future.

For most of the decade, it was going well for the Philippine automotive industry. Things hit a speedbump in 2018, however, when vehicle sales dropped for the first time in seven years as the industry reeled amid imposition of higher automobile taxes under the Tax Reform for Acceleration and Inclusion law, and the acceleration of headline inflation to the highest in recent history.

A joint report of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) showed that total sales last year fell 16% to 357,410 units last year from 425,673 vehicles in 2017, the first drop for the country since 2011 when vehicle sales also dropped by 16% to 141,616 units.

So 2019 is shaping up to be a critical year to see whether the country’s automotive sector can pick its momentum back up, or whether it is seeing the start of a downtrend.

Looking back on 2019

Credit and market intelligence experts Fitch Solutions predicted that 2019 would see a mild recovery, as it forecast sales to rise by 3.2% to 120,000 units in a report published in December 2018.

“While we expect households and businesses will have adjusted to the higher vehicle excise taxes imposed under the Philippines’ Tax Reform for Acceleration and Inclusion (TRAIN) law in 2019, we believe that unfavorable economic conditions in the form of high interest rates, elevated inflation, and a still weak peso will see car sales remain under pressure,” Fitch had said.

The firm added that over the full 2019-2027 forecast period, passenger car sales in the Philippines will average annual growth of 6.5%, to around 205,000 units by the end of 2027.

It did not get off to a great start, as vehicle sales slid 15% in January from 2018 due to industry-wide reductions across different categories, according to CAMPI and TMA’s joint data. Total sales for the first month of this year fell to 26,888 units from 31,645 sold in January 2018, and all segments from passenger cars to commercial vehicles saw double-digit drops in sales.

However, automotive sales have been steadily growing since then, except for a seasonal dip in August. In October, based on the latest available data released by CAMPI and TMA, the industry saw continued recovery and recorded its “highest monthly sales” so far this year.

Data jointly released by the groups showed that overall sales rose 3.8% to 34,397 units in October from 33,150 vehicles in the same month last year, and by 8.1% from 31,820 units sold in September.

CAMPI President Rommel R. Gutierrez described the latest growth clip as a “much-needed boost” for the industry to hit its target for the year. “The current market demand for vehicles along with creative and aggressive sales promotion efforts give us a positive outlook as we aim to sustain the growth trend for the remaining months of the year,” he said in a statement. “We remain positive that our industry target for the end of the year will be achieved as all brands remain committed to providing innovative mobility solutions to the Filipino people.”

Mr. Gutierrez last year projected a 10% sales growth for full-year 2019. Year-to-date, both groups have so far sold 301,761 units, 2.53% more than the 294,311 vehicles sold in 2018.

Broken down, this year’s October sales of passenger cars saw a 6.8% bump to 10,083 vehicles from 9,444 a year earlier. Commercial vehicles — which accounted for 70.69% of the total — went up by 2.6% to 24,314 units from 23,706 a year earlier. Asian Utility Vehicle sales jumped 40.2% to 4,780 vehicles from 3,409 units, while light commercial vehicle sales slipped 3.3% to 18,271 vehicles from 18,896 units.

Year-to-date, commercial vehicle sales went up 3.8% to 211,361 units, while passenger car sales dropped 0.2% to 90,400 units.

Toyota Motors Philippines Corp. (TMP) remained the industry’s biggest player with 47.69% of market share, selling 16,403 vehicles in October or 9.9% more than the 14,927 units sold a year ago. Mitsubishi Motors Philippines Corp. followed with a 16.01% market share, even as sales dropped by 8.3% to 5,508 units from 6,004 a year ago.

Nissan Philippines held the third spot with 10.75% market share as vehicle slipped 0.2% to 3,697 in October from 3,703, while Suzuki Philippines, Inc. followed with a 6.41% market share, growing sales by 11.8% to 2,206 units from 1,974.

Ford Motor Company Phils., Inc. followed with 4.78% market share, with sales up 1.1% to 1,643 from 1,625.

However, even as TMP retained the top spot, the company revealed that it was not confident it will achieve its annual sales target of 165,000 units.

A month earlier in September, TMP President Satoru Suzuki told the media that he is not confident about reaching the annual car sales target due to challenges still present in the country’s economic environment.

TMP First Vice-President Rommel Gutierrez, however, added that sales might pick up in the tail end of the year, as this is usually when consumers are most confident about spending.

The same positive outlook seems to gain some bearing among other players in the industry.

Hyundai Asia Resources, Inc. (HARI), the official distributor of Hyundai vehicles in the Philippines, while it reported a six percent drop in sales in the first 10 months of 2019, remains confident in the company’s performance in the coming months.

“While we don’t compete in some segments of the market (e.g. pickups), our volumes remain strong, underpinned by the quality of our vehicles and our focus on excellent after-sales services. Our models per segment remain competitive and this bodes well for the Hyundai brand in the Philippines,” HARI President and CEO Ma. Fe Perez-Agudo said.

Most of the company’s commercial vehicle sales are led by Hyundai buses such as Hyundai County, but after the recent rollout of its Class 2 Modern Jeepney, HARI is optimistic.

“With the transport department’s support and high demand from transport cooperatives, our modern jeepneys will contribute to our growth over the medium term. We are excited to give Filipino commuters the new King of the Road,” Ms. Agudo said.

“Combined with the acceleration of the government’s infrastructure projects, our CV business is poised to expand and provide fresh avenues of growth,” she said. — Bjorn Biel M. Beltran