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