PH auto industry sees sales rebounding in 2019

After experiencing negative growth this year, the domestic motor vehicle industry is more upbeat for growth in 2019 even projecting a modest 10 percent increase in sales.

“We are positive next year,” said Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc., adding they would like to project a 10 percent growth in 2019 over 2018.

Gutierrez said the market should have adjusted well ensuring stability a year after the implementation of TRAIN Law, which implements the higher excise tax on motor vehicles starting January this year.

As buyers advanced their purchases of vehicles in the last quarter of 2017, sales in 2018 suffered. The higher tax was further compounded by higher interest rates, high fuel cost and high inflation. This has prolonged sales recovery.

“We will bounce back,” Gutierrez said citing the optimism of car companies and buyers at the 7th Philippine International Motor Show.

As of September this year, motor vehicle industry still remained at negative 14 percent, worst since the Asian financial crisis.

“We are currently experiencing 14 percent 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 les 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 2017, Santos stressed that “economic factors are big” contributors to the negative sales this year.

Santos noting that foreign 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.

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.