On upward trajectory

THE GOVERNMENT has long considered the automotive industry as one of the key drivers of the country’s economy. In the past years, the industry showed no signs of slowing down, and has seen a steady growth of sales over the past years, with the bulk of it attributed to commercial vehicles (CV). In 2014, a total of 234,747 auto units were sold according to the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association ( TMA) — 90,287 units of which were passenger car ( PC) segment sales, while the 144,460 units were CV segment sales. On the other hand, the Association of Vehicle Importers and Distributors (AVID) reported a total of 35,565 auto sales, which is comprised of 18,467 units sold in the passenger car segment and 17,098 units sold were CVs, particularly in the light commercial vehicle ( LCV) segment.

Continuing its upward trajectory, a total of 288,609 auto unit sales were reported by CAMPI and TMA in 2015 with PC and CV segments indicating

notable increase in sales. The former segment recorded 116,381 number of units sold while the latter segment recorded a total sale of 172,228 units. In the same year, AVID also indicated a sales take up of 58,712 units; with total sales of 22,386 units for the PC segment and 36,326 units for the LCV segment.

In 2016, according to a joint report of CAMPI and TMA, the Philippine automotive industry indicated a 24.6% growth in sales, recording a total of 359,572 units sold, with CV segment getting the bulk of sales ( 226,384 units) compared to the number of units sold by the PC segment which is 133,188 units. AVID also reported a 60% increase in sales with a total of 93,179 units of autos sold, where majority of the sales were from the category 2 ( LCV) segment ( 57,409 units); while the PC segment recorded a total of 35,770 units sold.

Keeping a bullish stance in 2017, CAMPI and TMA reported that the industry indicated an 18.4% increase in sales with a total of 425,673 units sold; 286,249 units of which belong to the CV segment while the remaining 139,424 units were attributed to PC segment. On the other hand, AVID recorded a total of 106,286 units sold in 2017, which is 14% higher than the previous year, with the LCV segment recording total sales of 66,564 units while the PC segment recorded a total of 39,722 units sold.

As indicated in the report over the past years, CAMPI, TMA, and AVID noted a continuous growth for the CV segment. Vehicle brands such as Toyota Motors Philippines Corp., Mitsubishi Motors Philippines Corp., Ford Motor Company, Honda Cars Philippines, Inc., Isuzu Philippines Corp., and Hyundai Asia Resources, Inc. ( HARI) are consistently listed top performers in general.

OPTIMISM DESPITE CHALLENGES

While the auto industry continues to be bullish, 2018 poses some challenges with the implementation of the Tax Reform for Acceleration and Inclusion ( TRAIN) Law, which took effect Jan. 1 of this year. The law reduces the personal income tax rates, however, imposes higher excise tax on automobiles, petroleum products, and sugar among others

Both CAMPI and TMA noted a slower growth in sales of automotive vehicles at the start of the year. Their joint report indicated only 4% growth in sales compared to the 27% growth in the same period of last year.

In a separate media report, CAMPI President Rommel Gutierrez said, “We started the year with a modest growth of 4% in January 2018 against the same period last year. While this is considerably low compared to the growth rate of January 2017, we still consider January 2018 sales as satisfactory and a good start for the auto industry. We will continue our efforts in sustaining the growth momentum of past years.”

On the other hand, AVID President and concurrently HARI President and Chief Executive officer Ma. Fe Perez Agudo, said in a statement, “For the year ahead, we remain optimistic as we expect short- run market adjustments resulting from the TRAIN. Nevertheless, the new automotive landscape opens waves of opportunities for the luxury, e-vehicles, and hybrid vehicles market. Thus, AVID will continue supporting efforts to sustain inclusive growth and build a positive environment for business.”

Despite these hurdles, industry experts remain positive as the Philippines continue to be one of the fastest- growing economies in Asia. Moreover, opportunities are on the way especially now that the government, under President Rodrigo Duterte, is aggressively pushing for its infrastructure projects under the ambitious “Build, Build, Build” program.

These infrastructure projects can encourage a surge in sales in the CV segment. As stated in Fitch Group Co. unit’s industry trend analysis released in March 2017, “CV demand is closely linked with the performance of a country’s construction sector.”

HARI, the official distributor of Hyundai vehicles in the Philippines, noted in a statement that they expect the economy to continue its impressive growth for 2018, anchored on sound macroeconomic fundamentals and the current administration’s “Build, Build, Build” program, which is expected to pump prime the economy.

“With the passing of the TRAIN into law, pressure for further price increase, particularly in the automotive sector, is likely inevitable. Nevertheless, the automotive sector remains optimistic that the additional disposable household income of taxpayers resulting from TRAIN and the technology- driven value proposition of car players would likely to sustain high demand for automotive vehicles,” the statement added.

COMMERCIAL VEHICLE AS A TREND

Meanwhile, car companies like Nissan Philippines, Inc. ( NPI) are seeing the potential in commercial vehicles, specifically pickups as the preferred vehicle by consumers.

NPI president and managing director Ramesh Narasimhan said in separate media reports, “The pickup truck is going to grow given the excise tax exemption.” —