Into Overdrive: The Rise of the Motoring Industry
Motorization and the economy Increase in car sales is a trend in Southeast Asia, particularly in the Philippines. Today, owning a vehicle is already accessible even to the most common man. What used to be a luxury is now a commodity in the country owing to the many affordable packages and units that one can choose from. And the increase in the number of cars is a direct indication of how well the country is faring. In fact, an increase in the Gross Domestic Product of the country greatly affects the demand for motor vehicles. The term for this is called motorization. Which means that the higher the GDP, the greater the chances of citizens being able to afford and buy cars. A trend that started in 2013, the Philippines is expected to be a part of the third wave of motorization in ASEAN. In the first quarter of last year alone, sales have increased an impressive 19.3% with the industry selling a total of 18,662 units in the first month of last year, a huge jump from the previous year.
To better understand motorization, it is also best to understand the trend between GDP Per Capita and the level of car ownership and how it relies heavily on a country’s economic development. A country with low GDP per capita has proven to have a similarly lower level of car ownership because only a few people can afford cars. Countries with a large population ideally improve public transportation and infrastructure so the need for cars is lessened. In emerging markets like the Philippines, the development may not be as fast as expected so the only way for people to be able to move around is to be purchase vehicles on their own. The IMF recently projected the growth of GDP in emerging markets like ours will be higher than in developed countries within the next five years. This means that vehicle ownership will accelerate because we are about to reach the maximum GDP and this growth will greatly affect the motoring industry.
Bigger Purchasing Power It is clear that the economy is booming. The growth of the middle class family has bolstered the Philippines automobile industry showing a stellar performance in the past years. In fact, in 2014 alone, The Asean Automotive Federation cites the Philippines as the fastest growing automobile market in the region ahead of bigger giants like Singapore, Malaysia, Indonesia, and Vietnam, something that can be attributed to stronger consumer purchasing power, rising investments, and even easier financing. Easy auto financing deals are contributing greatly to the surging sales of motor vehicles, specifically private cars. Gone were the days when it would take forever to be able to get a car loan. Today, the increasing availability of loans, especially to the middle class, are proving to be the main source of enormous growth in the automobile industry. Motorization has truly begun in the country. And a huge potential growth still remains with more and more people owning more than one vehicle to avoid the vehicle number coding scheme of the country.
More and more middle class citizens are also purchasing more vehicles in order to join car services like Grab and Uber in the hopes of a better income. This has proven to positively affect the sales of cars in the country. The Effect of Motorization Motorization in the country is exciting without a doubt. The good news is that there will be a boost in the automobile industry that will lead to more jobs in industry related to the automobile industry. It will greatly affect the assembly industry while at the same time encourage growth in basic industries such as petrochemicals, textiles, chemical, rubber, iron, steel. Component manufacturers will be affected as well and other supporting industries. This is the good part about motorization. It will greatly affect all the other industries. However, in a country such as ours, and in the current state of traffic, one can’t help but ask how the country’s roads will be able to sustain and accommodate all the cards on the road. And while this is currently a challenge, it also places a sense of urgency because with the increasing number of cards on the road, it’s important for the government to move fast and quick in taking care of the public transportation system.
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