Fitch So­lu­tions ex­pects ‘mild re­cov­ery’ in PHL car sales next year

Watchmen Daily Journal - - BUSINESS -

The Philip­pine auto in­dus­try is set to re­cover next year, af­ter car sales were dragged by higher ex­cise taxes on ve­hi­cles this year, Fitch So­lu­tions Macro Re­search said in a com­men­tary.

How­ever, neg­a­tive eco­nomic de­vel­op­ments will keep sales un­der pres­sure.

The re­search group said house­holds and busi­nesses have ad­justed to the higher ve­hi­cle ex­cise taxes im­posed un­der the Tax Re­form for Ac­cel­er­a­tion and In­clu­sion (TRAIN) law.

Repub­lic Act No. 10963 or the TRAIN law im­posed a tax rate of 4 per­cent on ve­hi­cles cost­ing P600,000 and be­low, from the pre­vi­ous rate of 2 per­cent, with more ex­pen­sive cars get­ting ever higher taxes. “In 2019, we ex­pect

a mild re­cov­ery in the Philip­pines’ new pas­sen­ger car mar­ket, and fore­cast sales to grow by 3.2 per­cent, reach­ing a to­tal of around 120,000 units by year-end,” Fitch So­lu­tions said.

Lat­est data from the Cham­ber of Au­to­mo­tive Man­u­fac­tur­ers of the Philip­pines Inc. (CAMPI) and Truck Man­u­fac­tur­ers As­so­ci­a­tion (TMA) showed ve­hi­cle sales in the first 10 months of the year de­clined by 13.3 per­cent to 294,207 units from 339,380 units in the same pe­riod last year.

Fitch So­lu­tions, how­ever, said “car sales re­main un­der pres­sure” from “un­fa­vor­able eco­nomic con­di­tions” such as:

● high in­ter­est rates

● el­e­vated in­fla­tion

● weak peso

In­fla­tion clocked in at 6 per­cent in Novem­ber, slower than the 6.7 per­cent posted in Oc­to­ber.

Year-to-date, in­fla­tion set­tled at 5.2 per­cent in Jan­uary to Novem­ber and hit the gov­ern­ment’s re­vised in­fla­tion tar­get of 4.8 per­cent to 5.2 per­cent for the whole 2018.

The ex­cise tax pro­vi­sion un­der TRAIN also raised the levy on cars priced at P600,000 to P1 mil­lion to 10 per­cent from 2 per­cent.

Cars priced be­tween P1 mil­lion and P4 mil­lion were slapped with a tax rate of 20 per­cent, from the pre­vi­ous scheme of P112,000 plus 40 per­cent in ex­cess of P1.1 mil­lion for cars cost­ing P1.1 mil­lion to P2.1 mil­lion.

Ve­hi­cles that each cost P4 mil­lion and above were levied a rate of 50 per­cent from the pre­vi­ous scheme of P512,000 plus 60 per­cent in ex­cess of P2.1 mil­lion.

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