THERE’S no slowing down for the country’s automotive industry. In the last 3 to 4 years , auto sales have been hitting record highs, month-after-month, year-after year.
Based on the offi cial fi gures released by the Chamber of Automotive Manufacturers of the Philippines. Inc. and the Association of Vehicle Importers and Distributors , combined sales of these two groups have reached 330,116 units , 40,000 units shy of the industry target of 370,000 units for the nine-month period of the year.
CAMPI and the truck makers group, the Truck Manufacturers Association, alone chalked up 261,370 units while AVID sales of imported vehicles reached 68,746 units.
Industry leaders Toyota Motor PhilippinesCorporation and Mitsubishi Motors Philippines Corporation say their 2016 target is achievable and may even surpass expectations as the holidays draw near.
“Third quarter sales remained strong. We expect sustained growth as we enter the fourth quarter,” said CAMPI president Rommel Gutierrez.
The vehicle importers group led by AVID reported sales in the fi rst three quarters grew 77 percent while the third quarter alone is likewise strong, reporting a 27 percent jump in sales to 23,283 units.
“As the year 2016 nears its closing, outlook on AVID performance remains upbeat, expected to grow above market expectations due to strong demand and robust macroeconomic fundamentals. And as sales increase, AVID is all the more resolute to reimagine its products and services to provide the constantly-changing Filipino market an ultimate driving experience,” said AVID president Ma. Fe Perez-Agudo.
For the month of October, CAMPI sales hit 292,502 units, up 24.5 percent from 234,951 units sold in the same period in 2015.
With the recent sales record and the expected output of vehicle importers, the industry is optimistic sales may even go beyond expectations and may hit over 400,000 units in combined sales.
Resurgence Based on the government-crafted incentives scheme CARS, the automotive industry is expected to hit sales of half a billion units by 2022, but recent estimates showed, that the rising demand for mobility, automotive sales may hit the target 500,000 units two years earlier or by 2020.
“More or less, next year we will be able assess if there is a need to change the 500,000 units (target sales). The demand is high because we now have improved purchasing power,” Gutierrez said.
He added that the industry may choose to import the anticipated volume but the need to build an independent automotive industry and generate jobs are more paramount than the mere whim of deriving profits from selling.
At present, the ratio of imported cars against locally-manufactured cars is at 70:30, in favor of imported vehicles.
“The chance of reversing this trend is near impossible. But the local industry can always strive to achieve 50:50 ratio,” said Gutierrez.
The industry’s Vision 2020 projected the sale of 500,000 units in the next four years guided by the growing automotive demand that is fueled by steady growth in income.
The industry noted that the strong domestic market potential is evidenced by the fact that nearly half of the Filipino households or 47 percent are car-less.
Just recently, CAMPI revised industry sales forecast for the year to 370,000 units from 360,000 units, after fi rst semester sales accounted for than half the target volume.
In 2015, actual sales went beyond the forecast of 272,000 units.
The automotive industry account for 12 percent of the industrial output and 4 percent of the total gross domestic product (GDP) during the previous administration, according to government statistics.
The industry intends to increase the share of the manufacturing sector to 30 percent of the country’ gross domestic product (GDP) from 23 percent and increase employment by 15 percent from 9 percent.
The automotive industry remains one of the major drivers of the country’s industrial sector with sales totaling about P250 billion in the last 3 years.
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Tax Hurdle
While the industry is bent on pushing sales to new heights and contributing more to the economy, the proposed tax reform may undo gains achieved in the recent years.
The pending proposal to increase excise tax, specifi cally ad valorem, based on graduated rates and on automotive models and categories, may earn additional taxes for the government but may slowdown the trajectory for growth of the industry.
Recent developments showed efforts of the local automotive industry in pushing for the exemption of vehicles registered under CARS from a proposal to expand tax revenues.
CAMPI vice president and MMPC corporate secretary and fi rst vice president Dante Santos said the Trade Department is backing the industry position.
“We will be asking for lower rates for the entire automotive sector. We have to protect the local industry, the CARS program and the requirement of the industry, as well. CARS is supposedly the vehicle for the masses, if that will be compromised, then all is gone,” he said.
Based on initial estimates, the increase in unit price may range from P100,000 to P200,000 per unit depending on the unit/model category.
The industry recently met with the Finance Department to apprise the government of the sentiments of the industry. A position paper will be submitted soon to formalize the industry’s stand on the proposed tax increases.
CAMPI is currently fi nalizing a study that will support the industry’s initial claim of slower sales and the detrimental effects to government incentive programs like CARS and the Motor Vehicle Development Program (MVDP).
The study will also determine the value of increases per gradation or category and the volume of sales lost if the tax proposal is approved in its original text.
Apart from tax hurdles, the unstable foreign exchange is also impairing the viability of vehicle pricing.
The industry, Santos said, will be forced to impose upward price adjustment by December or January 2017.
“This is the forex level during the ASEAN fi nancial crisis. The rates haven’t settled down yet and it keeps on increasing. Our (MMPC) current costing in based on $45 (to a peso). It has been awhile since we adjusted due to forex rates,” he explained.
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