We all know how the Philippines automotive industry welcomed 2018 and it wasn’t the best news for all car manufacturers. We are talking about the Tax Reform for Acceleration and Inclusion (TRAIN) Act that took effect in January 2018. This pulled prices of cars according to their segments, while some, specifically light pickup trucks and crossovers, dropped theirs.
TRAIN’s effect was immediately felt during the first quarter (Q1) of 2018. That was when the Association of Vehicle importers and Distributors, Inc. (AVID)—composed of Auto Nation Group, Inc., British Bespoke Automobiles, Inc., British United Automobiles, Inc., The Covenant Car Company, Inc. (TCCCI), DBPHILS Motorsports Incorporated, Ford Group Philippines, Hyundai Asia Resources, Inc. (HARI), Motor Image Pilipinas, Inc. (MIPI), PGA Cars, Inc., Scandinavian Motors Corporation, and Suzuki Philippines, Incorporated (SPI), and JAC AUTOMOBILE INT'L PHILS. INC. (JAIPI)—saw a 2% decline in sales.
As months went by, the effect got worse for AVID. The group reported an 11% sales downslide for the first half (H1) of this year. From 48,344 units of the same period in 2017, Avid recorded only 43,138 this year, which is 5,206 units short.
Breaking that down, the group sold 16,176 passenger car (PC) units from January to June 2018. That 2,593 less, or a 14% decline, than what it made in the same period of 2017, which was 18,769 units. According to AVID, the PC segment’s sales is still spearheaded by Hyundai, as it was able to sell 10,838 units (15,957 units PC and LCV combined) for H1. This was despite Hyundai Asia Resources, Inc.’s (HARI) report of a 10% slowdown on that segment.
The light commercial vehicle (LCV) segment sales on the other hand, slid 10% down compared from H1 2017. All segments went down except pickup trucks, which are exempted from paying excise taxes under the TRAIN law. Still, the LCV segment hit 26,528 units this year from the 29,575 of H1 last year. Ford was able to keep its claws planted in this segment with its 12,155 total sales. The Ranger alone reached a 19% inflate in sales, owning 23% of the pickup segment’s sales.
Last but not least, AVID’s commercial vehicle (CV) segment is being represented with its recent member JAC Automobile International Philippines Inc. The newcomer sold 434 units for H1 2018. As a review, JAC became a member of the group in May 2018, bringing in light and heavy trucks, buses, coaches, and heavy equipment into the local market.
“First semester AVID sales reached 43,138 units sold as the consumers are still adjusting to new income and new commodity price levels. Nevertheless, we see this as a transitionary period and may soon normalize as both supply and demand factors stabilize.”
However, AVID isn’t putting the blame on TRAIN alone. In January 15, 2018, petroleum companies had to increase their fuel prices in effect of the excise tax on gasoline and diesel. This made a huge impact—at least, as to how AVID sees it—as it added significant value to the total cost of vehicle ownership. We may see it this way – as post-purchase expenses get higher, more people would obviously opt for a much cheaper car.
In a deeper analysis however, AVID sees this as an opportunity when it comes to electric and hybrid vehicles. These vehicles are part of the excise tax exemptions and investing on these sounds like a pretty good idea. At this point, the number of electric and hybrid cars in the country are countable by hand. The group believes that this somehow puts them in a favorable position.