Industry sees 14% drop in auto sales

The domestic motor vehicle industry expects a 14 percent decline in sales this year, worst since the Asian financial crisis, as the TRAIN Law plus other economic factors especially high inflation contributed to dampen growth

Rommel Gutierrez, president of Chamber of Automotive Manufacturers of the Philippines Inc., told reporters covering the 7th Philippines International Motor Show that the industry continued to post negative growth as of end third quarter this year.

Joint sales of CAMPI and the Truck Manufacturers Association (TMA) have been down by 14 percent as of September this year versus same period last year.

“We are currently experiencing 14 decline so we hope to end the year at that level,” said Gutierrez, visibly disappointed that decline in sales continued.

Data would show that the projected 14 percent negative sales growth by end this year would be the worst since the 43.76 percent decline in 1998, the height of the Asian financial crisis.

Late last year, CAMPI and TMA jointly projected a flat growth in 2018 because of the impact of the excise tax on cars under TRAIN 1, which took effect on January 1, 2018.

To avoid the higher prices of cars, buyers had advanced their purchases in the last part of 2017, resulting in the exceptional high growth in car sales in 2017.

Because of that the industry anticipated negative growth in the first two quarters of 2018 only as market was also expected to be able to adjust in the third to last quarters to end the year on a flat growth.

“But inflation contributed to the continued decline in motor vehicle sales,” he said.

Gutierrez recalled that the automotive industry enjoyed an average 16 percent growth since 2010 or in the past 8 years.

Overall sales of motor vehicles in 2017 grew by 18.4 percent to 425,673 units versus 359,572 units in 2016.

TMA President Dante Santos said the industry is undergoing a “very dramatic change in sales.”

Unfortunately, Santos said, other economic factors such as high interest rate, weak peso, high oil prices, and higher prices of commodities resulting in an elevated inflation rate have further dampened consumer appetite causing car sales to remain in the red category in the past three quarters.

Aside from the accelerated purchases in the last quarter of 2917, Santos stressed that “economic factors are big” contributors to the negative sales this year.

Santos noting that for-

eign exchange rate alone deteriorated from 148 to a dollar in December 2017 and now at 154 level already plus the high interest rate.

Banks’ high interest rate also discouraged big ticket purchases.

With soaring prices of basic and prime commodities, he said, buyers held off purchases of major items like cars.

In the hierarchy of needs, Santos said, cars are in the third or fourth.

Already, Santos said that car companies may also further adjust prices this year from the 5 percent earlier.

“A 10 percent increase in car prices is the worst,” he said.

“We are called a tiger economy in the last two years and suddenly 12 months after we are no longer tiger.”

But, Santos noted that all is not lost because the domestic economy is still strong.

“The bottom line is that the economy is still strong because we have strong fundamental, solid and we have infrastructure so we are not failing much as a country,” he emphasized.

He also cited government efforts to control rising inflation by freezing prices on basic commodities such as rice, pork, and chicken.

The National Food Authority Council has also allowed more rice importation of rice, vegetables and fish to augment local supply. The lack of supply was blamed for the skyrocketing prices of basic and prime commodities.