Trends we might (still) see in 2019
The good and bad of 2018
Last year didn’t look good for the automotive industry after the Tax Reform for Acceleration and Inclusion (TRAIN) Law implementation. Vehicle prices went up by at least R9k and by more than a quarter of a million pesos for some luxury vehicles. Fuel prices? Well, aside from the fluctuations in the market, which were mostly and painfully on the upward trend, gasoline got close to a R3 increase, while diesel and auto LGP went up by R2.50. Traffic got worse and if it all seems very bleak right now, remember that it’s called ‘growing pains’ for a reason.
We take a sneak-peek at the industry’s future based on its past to see how trends of last year will affect us in 2019.
Rising fuel prices
An oil price hike was recently effected — 70 centavos on diesel and 80 centavos on gasoline, and this didn’t even have anything to do with the TRAIN law — as per the Department of Energy (DOE), the increase is due to price movements in the global market caused by reduced oil production by Saudi Arabia. This puts high-octane fuel at upwards of R50 while high-cetane fuels hover at the R40 mark.
Keep in mind that these prices will still go up sometime between January 15 to February 1 when the DOE implements the second tranche of the fuel excise tax under the TRAIN law. By then, tack on another R2 on gasoline, and R2.50 for diesel and auto LPG. Ouch!
Timid PC sales
It’s no big secret that passenger car (PC) sales have been on the decline over the last year. In June 2018 for example, PC sales amounted to only 7,811 units. That’s almost half of the 13,677 units sold in the same month of 2017. And even though it picked up ever so slightly in the following months, August to October, total industry sales for the first eleven months of 2018 was still 14.4-percent short of what it was compared to sales of January-November 2017. While there were talks of fuel excise tax suspension and even a short-lived positive decision that never made implementation, there is nothing of that sort with regards to auto pricing. These SRPs will remain as it is this year and until the foreseeable future.
Be that as it may, auto manufacturers/ importers/ distributors are confident the market has become attuned to the current vehicle pricing scheme and buyers are now financially adjusted for their next auto purchase.
Market shift to light trucks
This was the silver lining during this challenging time. Because of the tax exemption on pickup trucks and other commercial vehicles, sales weren’t as bad month on month. For example, sales in July 2018 were higher by 749 units compared to July 2017, in August by 1,855, September was a plus 1,489 and October saw an increase of 2,375. These numbers, again, are in comparison to the same months of 2017. It only dipped in November and we have yet to get the figures from December 2018.
Why? First, automakers like Toyota, Chevrolet and Ford have done a great job in cascading technology from passenger cars to their pickup